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As it likes to remind us, there's a fresh pot at Tim Hortons.

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Its new chief executive officer is winning praise, its shares have climbed back from the lows of late last year, and its outlook is somewhat brighter among analysts.

As The Globe and Mail's Marina Strauss reports, Canada's coffee-and-doughnut king came in this week with a higher quarterly profit and a plan for an expanded stock buyback.

Second-quarter profit climbed to $123.7-million or 81 cents a share from $108.1-million or 69 cents a year earlier, while revenue increased 2 per cent to $800.1-million.

Tims also said it is maintaining its earnings-per-share targets for this year, though it did warn that Canadian and U.S. same-store sales, a key measure in retailing, are expected to fall below its targeted range given the year so far.

Key to the company's announcement Thursday, following pressure from activist investors, is a plan to add $900-million in debt to fund an expanded stock buyback of $1-billion over the next year.

"Our initial impression is that new CEO Marc Caira has a healthy respect for the accomplishments of the Tim Hortons franchise system and the brand, but is squarely focused on accelerating future growth," said Desjardins analyst Keith Howlett.

"The company has begun its strategic planning process and is addressing the hard questions of how to keep the brand fresh and vibrant in Canada, and how to grow faster and more profitably in the U.S."

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Tim Hortons shares have run back up from the $45 range last December to the $61 area, and analysts have boosted their price targets on the stock.

Mr. Howlett, for example, raised his target to $60 from $57, while boosting his forecasts for earnings per share to $2.93 this year, up from $2.87, and $3.32 next year, up from $3.18.

"Tim Hortons is entering a new era, with its first CEO from outside of its culture," Mr. Howlett said of Mr. Caira, a former executive at Nestlé SA.

Derek Dley of Canaccord Genuity went further, upgrading his recommendation on the stock to "buy" from "hold" and his price target to $67 from $52.

"We are becoming more constructive on the stock following the announcement of shareholder friendly initiatives, despite still challenging fundamentals in Canada, which we believe will be overshadowed by the company's increased share buyback and reduction in U.S. spending," he said.

The week in Business Briefing

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The week in Streetwise (for subscribers)

The week in Economy Lab

The week in ROB Insight (for subscribers)

Required reading
After years of lip service, a serious bipartisan effort to trim corporate tax rates and simplify the U.S. tax code is gaining traction, Kevin Carmichael writes. The hope is that reforming the system will encourage companies to start spending again.

Unions are making inroads into typically low-age, part-time work places, Thandiwe Vela reports, noting how the slow recovery from the recession has been particularly hard on Canada's young people.

The Canadian government is taking new steps to cool Canada's housing market. Tara Perkins looks at how Canada Mortgage and Housing Corp. is limiting guarantees it offers banks and other lenders on mortgage-backed securities.

Jacquie McNish takes an in-depth look at Montreal Maine and Atlantic Railway Inc. in the wake of the Lac-Mégantic tragedy. Read her interview with the chief of parent company Rail World Inc.

While similarities abound, there are enough differences between the two countries to insulate Canada from the economic turbulence facing Australia, Richard Blackwell reports.

Canadian companies are facing higher pension costs after an influential group published new research that suggests workers are living longer than previously thought. Tara Perkins reports.

The Bank of England has followed the Federal Reserve in a dramatic shift that links interest rates to unemployment. Paul Waldie reports from London on the central bank's new signal to the markets.

Potash Corp. of Saskatchewan's CEO has a message for anxious investors: The sky isn't falling. Josh Kerr reports on Bill Doyle's response to the collapse of a Russian potash cartel and how it hit the stocks of potash producers.

The days of guaranteed placement on the Canadian TV dial are nearing an end as the country's regulator signals to broadcasters it may never again grant that privilege to specific channels, Steve Ladurantaye and Simon Houpt report.

Imperial Oil Ltd. and Exxon Mobil Corp. have teamed up to buy a major Alberta oil sands property, ending a drought of big deals for bitumen-rich lands that had persisted since the beginning of the year, Jeffrey Jones reports.

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About the Author
Report on Business News Editor

Michael Babad is a Report on Business editor and co-author of three business books. He has been with Report on Business for several years, and has also been a reporter and editor at The Toronto Star, The Financial Post and United Press International. His articles have appeared in major newspapers around the world. More


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