TIM HORTONS $54.48 (Toronto symbol THI; TSINetwork Rating: Average) (905-845-6511; www.timhortons.com; Shares outstanding: 155.8 million; Market cap: $8.5 billion; Dividend yield: 1.6%) operates 3,295 coffee-and-donut shops in Canada and 714 in the U.S.
The company earned $0.56 a share in the three months ended April 1, 2012. That’s up 16.7% from $0.48 a share a year earlier.
Sales rose 12.1%, to $721.3 million from $643.5 million. Tim Hortons opened 22 outlets in Canada and seven in the U.S. during the quarter. Same-store sales (which exclude new outlets) rose 8.5% in the U.S. and 5.2% in Canada.
The company raised its prices to offset higher costs for ingredients and fuel. It also launched several successful new menu items, such as fruit smoothies and panini sandwiches. These were the main reasons for the higher sales.
Tim Hortons needs a sustained recovery in consumer spending to show continued same-store sales growth. Meanwhile, it still has room to expand. In Canada, for example, it aims to open new outlets inside gas stations, universities, hospitals and airports.
The stock trades at 19.8 times the company’s forecast 2012 earnings of $2.75 a share. That’s reasonable in light of its strong growth prospects.
As well, a $2-billion class action lawsuit that accused the company of overcharging franchisees for baked goods was recently dismissed. That further cuts Tim Hortons’ risk.
Tim Hortons is a buy.
