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Tim Hortons shares at record high as earnings approach

Tim Hortons Inc., a company that normally has no problem attracting attention in this country, has been largely flying under the radar of late. News flowing from the doughnut and coffee chain hasn't exactly been market-moving stuff, with a highlight from April possibly being the launch of a tasty new frozen lemonade treat.

Shareholders aren't complaining about the lack of excitement. Tim Hortons reached an all-time high on Tuesday of $57.58, up more than 20 per cent from a year ago. It remains not far from that level today.

Next Wednesday, Tim Hortons will return to the spotlight as it reports first-quarter results. Expectations are for solid results. With winter rarely making an appearance this year, Canadians were free to flock to their local Tims without worrying about snow tires. And the results will be compared to an unusually weak first quarter of 2011, when the company's ramp up of food and beverage prize redemptions tied to the 25th anniversary of the Roll up the Rim to Win contest dragged down same-store sales growth.

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"While competitive pressures increased in the quarter, we believe Tim Hortons was likely able to better navigate these challenges with its current offering, than it was the challenges of the first quarter of 2011," said Raymond James analyst Kenric S. Tyghe. He notes that Tim should benefit from sales of its new expresso-based beverage offering.

He expects first-quarter results of $702.5-million, up 9.2 per cent from a year ago, and roughly in line with consensus estimates. He sees same-store sales growth in Canada rising 4.8 per cent and 5.1 per cent in the United States. The consensus earnings per share estimate is 59 cents; Mr. Tyghe is forecasting 58 cents.

Upside: Mr. Tyghe maintained a "market perform" rating and $48 price target.

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Canaccord Genuity analyst Scott Chan has slashed his first-quarter growth estimate for Sprott Inc.'s assets under management to 6.2 per cent from 10 per cent, citing soft fund performance and lower net sales expectations for February and March. He now expects earnings per share in the quarter of 4 cents, which is a penny lower than the Street consensus.

Downside: Mr. Chan cut his price target by $1.25 to $6 and maintained a "hold" rating.

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Talisman Energy Inc. enjoyed a strong first quarter from an operational standpoint, but financial results were disappointing, in part because of higher-than-expected taxes. CIBC World Markets analyst Andrew Potter said he still sees "deep value" in the company, but catalysts to propel the stock higher may have to wait until the second half of 2012 and will depend on exploration success and continued strong execution of its business plan. "Investor patience with TLM has worn thin and the company is under the gun to deliver results," he said.

Upside: Mr. Potter maintained a $20 (U.S.) price target and "sector outperformer" rating.

Read more: Low gas prices push Talisman to cut back on shale gas plays

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A solid first quarter at WestJet Airlines Ltd. has prompted CIBC World Markets analyst Kevin Chiang to boost his 2012 and 2013 earnings estimates for the company. He's upbeat about WestJet's future as it moves ahead with a short-haul airline and continues to build out its vacations division. WestJet trades at a discount to peers, and Mr. Chiang believes this is "unwarranted" given growth opportunities and the strength of its balance sheet.

Upside: Mr. Chiang raised his price target by $1 to $18.50 and maintained a "sector outperformer" rating on WestJet, one of CIBC's top picks in equities.

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Relate: How is WestJet performing so well?

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Argosy Energy Inc. has agreed to sell its interests in Alberta's Ante Creek area for $5-million to reduce debt and focus efforts on its plays within the Bakken basin area of the province. It's also considering "strategic alternatives," such as selling shares, a merger, or further asset sales. Canaccord Genuity analyst Frederick Kozak still rates Argosy as a "speculative buy" given encouraging exploration so far at the Bakken assets. "Early indications are that the company's Alberta Bakken lands are in a sweet spot. The current market capitalization of the company is approximately what these lands alone may sell for at a potential land sale," he said.

Upside: Mr. Kozak slashed his price target to 80 cents from $2.80.

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About the Author
Investment Editor

Darcy Keith is The Globe and Mail's Investment Editor. He has been a business journalist since 1992 and joined the Report on Business in 2010 from Yahoo! Canada, where he was the senior editor of finance. More

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