TIM HORTONS INC. $60 (Toronto symbol THI; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 134.2 million; Market cap: $8.1 billion; Price-to-sales ratio: 2.5; Dividend yield: 2.1%; TSINetwork Rating: Average; www.timhortons.com) operates 3,610 coffee-and-donut stores in Canada, 870 in the U.S. and 44 in the Persian Gulf.
In the quarter ended March 30, 2014, the company’s revenue rose 4.8%, to $766.4 million from $731.5 million a year earlier. That’s mainly because it opened 23 outlets in Canada and 11 in the U.S. Same-store sales rose 1.6% at its Canadian locations and 1.9% in the U.S.
Earnings gained 5.5%, to $90.9 million from $86.2 million. Per-share earnings jumped 17.9%, to $0.66 from $0.56, on fewer shares outstanding.
The company plans to open 800 outlets (500 in Canada and 300 in the U.S.) over the next five years. Franchisees will build and operate these stores, which cuts Tim Hortons’ risk. It also plans to simplify its menu and speed up checkout times, which should encourage more repeat visits.
The stock trades at a reasonable 18.5 times Tim Hortons’ likely 2014 earnings of $3.24 a share. The $1.28 dividend yields 2.1%.
Tim Hortons is a buy.
