Earnings Preview: What to Expect When Tim Hortons Inc Reports This Week

Can Tim Hortons Inc (TSX:THI)(NYSE:THI) deliver for shareholders this quarter?

The Motley Fool

Tim Hortons Inc (TSX: THI)(NYSE: THI) is scheduled to report its quarterly earnings on Wednesday. While the company remains the No. 1 coffee and doughnut chain in Canada, investors are worried that its business concept is going stale. Let’s take a peek at what has been happening at the company over the past few months and what we’re likely to see in the upcoming report.

Stats on Tim Hortons

Analysts’ EPS Estimate $0.87
Year-Ago EPS $0.81
Revenue Estimate $843.77M
Change From Year-Ago Revenue 5.5%
Earnings Beats in Past Four Quarters 2

Source: Yahoo! Finance

Can Tim Hortons continue to grow?

Analysts have been steadfast in their views on the company’s earnings in recent months, only raising their consensus profit estimate for the upcoming quarter by a penny. The stock has been trading flat in lock-step, up only 2% since late May.

It was around that time that Tim Hortons celebrated its 50th anniversary. On May 17, 1964, the original ‘Tim Hortons restaurant opened its doors in Hamilton, Ontario. Today, the chain is now a fixture of Canadian culture. A study from marketing research company Ipsos Reid found that Tim Hortons ranked as the sixth most influential brand in the country last year.

However, beneath the celebration, there are growing worries that the Tim Hortons expansion has run its course. With more than 3,600 restaurants across Canada, the company has exhausted most of its obvious expansion avenues. Efforts to branch out in the United States have been mixed so far.

Competitors are also looking to steal a chunk of the market. Starbucks Corporation has spent years heading an ambitious Canadian rollout, chasing high-margin customers who prefer cappuccinos and lattes. Meanwhile, McDoanld’s Corporation began to lure more cost-conscious coffee drinkers with cheap drinks and promotional giveaways.

Chief Executive Marc Caira’s job is to convince investors that the company still has a long growth runway ahead of it. Over the next five years, Caira sees room for more than 500 new locations across Canada — primarily smaller kiosks and captive audiences like sport stadiums and hospitals. Management is also planning an expansion into new markets, namely the Middle East and the U.S. midwest.

Tim Hortons is also defending its home turf from rivals through store renovations and new product launches. The company is also trying to squeeze more sales out of existing stores by encouraging customers to opt for three or four items with each order, rather than one or two. These efforts have already provided a material boost to same-store sales.

In its upcoming report, be sure to watch the progress of these growth initiatives closely. Are customers purchasing more food items with each order? Are U.S. customers starting to buy into the Tim Hortons concept? Commentary in this upcoming conference call could provide a glimpse of the company’s earnings prospects for many quarters to come.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Robert Baillieul has no position in any stocks mentioned. David Gardner owns shares of Starbucks. Tom Gardner owns shares of Starbucks. The Motley Fool owns shares of Starbucks.

More on Investing

analyze data
Tech Stocks

Nuvei Stock Is on Fire This Year: Is it a Good Buy Today?

For investors looking for a prominent Canadian growth story, Nuvei stock has become a clear winner, but can the rally…

Read more »

stock analysis
Investing

Is BCE Stock a Buy?

BCE (TSX:BCE) stock looks incredibly attractive, as shares pick up again, while the yield remains bountiful.

Read more »

analyze data
Dividend Stocks

The Best Dividend Stocks in Canada Right Now

Earn worry-free income from these best Canadian dividend stocks.

Read more »

Value for money
Dividend Stocks

3 Top Canadian Value Stocks in December 2023

Not all undervalued stocks are worth buying. You should look into the fundamental strengths of the stocks and reconcile value…

Read more »

calculate and analyze stock
Investing

2 TSX Stocks to Dominate the Market in 2024

Two stocks with market-beating returns with one month to go this year are the frontrunners to dominate the market in…

Read more »

Young woman sat at laptop by a window
Investing

SPY Stock Is Just the Tip of the Iceberg for Canadians Investing in the U.S.

These two BMO ETFs are great alternatives to just buying SPY.

Read more »

TFSA and coins
Stocks for Beginners

How a BIG New TFSA Change Could Affect You in 2024

Canadians are in for a BIG surprise for the TFSA in 2024. Here's how TFSA changes could help you keep…

Read more »

Growing plant shoots on coins
Dividend Stocks

2 Under-the-Radar Dividend Payers With Solid Growth Prospects in 2024

These under the radar monthly dividend payers could provide good growth prospects in 2024 and beyond.

Read more »