Analyzing Tim Hortons’ 3Q14 earnings

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Dec. 4 2014, Updated 12:49 p.m. ET

Earnings per share

Tim Hortons’ (THI) second quarter earnings were released on November 5. It reported a diluted earnings per share (or EPS) of $0.68—compared to an EPS of $0.72 in the same quarter last year. The revenues grew 5% year-over-year (or YoY) from $794 million to $835 million. The total operating expense as a percentage of sales grew from 79% to 81%. This squeezed the operating margins to 18%—compared to 20% during the the same period last year. Net profit margins declined from 13.7% to 10.7% YoY.

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Company overview

THI is headquartered in Ontario, Canada. It operates quick-service restaurants mainly in the US and Canada. It has more than 4,500 restaurants. THI offers coffee, specialty beverages, teas, fruit smoothies, classic sandwiches, panini sandwiches, soups, chili, and wraps. THI also offers breakfast items—like sandwiches, donuts, bagels, muffins, oatmeal, danishes, and croissants.

Peers

In the US, THI competes with restaurant chains like McDonald’s (MCD), Starbucks (SBUX), and Dunkin’ Donuts (DNKN). MCD reported EPS of $1.09—down 28% from last year. SBUX reported EPS of $0.74—up 36% from last year. DNKN reported EPS of $0.52—up 41% from the same quarter last year.

Exchange-traded funds (or ETFs)—like the Consumer Discretionary Select Sector SPDR Fund (XLY), which includes McDonald’s and Starbucks—give investors wider exposure to the restaurant industry.

Topics discussed in this quarterly overview

In this quarterly overview, we’ll take a deeper look into THI’s earnings. We’ll also discuss key value metrics like same-store sales, cost impacts, how the market reacted to the earnings, and Burger King’s year-to-date (or YTD) stock performance.

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