Tim Hortons: Analysts See Limited Upside

| About: Restaurant Brands (QSR)

Tim Hortons Inc. (THI) saw its profit triple in the fourth quarter, while earnings per share jumped to 35¢ from 10¢.

The healthy results came after the coffee and doughnut chain added 111 new stores in the quarter, compared to 93 a year earlier. Strong sales growth was also driven by the launch of its breakfast sandwich, which competes with McDonald’s (NYSE:MCD) Egg McMuffin.

While the results came in slightly ahead of estimates from both Citigroup and Blackmont Capital, analysts at the two firms remain somewhat mixed on the prospects for Tim Hortons shares.

Citigroup’s Glen Petraglia raised his price target on the stock to $38 from $36, while maintaining his “hold” rating. This represents upside of less than 3%.

He sees limited upside in the near term, but thinks the stock’s premium multiple can be sustained, Mr. Petraglia said in a research note.

Meanwhile David Hartley at Blackmont lowered his price target by $1, but remains much more optimistic with a forecast of $43 per share.

He has reduced both his 2007 and 2008 EPS estimates on expectations of additional costs for the company.

THI 1-yr chart:

THI 1-yr chart

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