Stock of the day 12/05/2016 – Thomas Cook Group PLC

Whilst easyJet and TUI have suffered in the last few months, neither has experienced the precipitous fall seen by Thomas Cook.

How will the struggling travel stock fare when it reveals its half year figures next Thursday?

There was to be no New Year cheer for Thomas Cook. After a horrid 2015 saw the company finish at £1.20, the stock immediately began to nosedive as 2016 began. Sharp declines in both January and February left Thomas Cook gasping for air as it plunged below the £1 mark for the first time in nearly 3 years.

Yet, for a brief moment at least, things began to look up for the travel giant. On February 11th it posted its fiscal first quarter results, revealing a company in not quite as bad a shape as expected. With tourists shifting their holidays from Turkey and France (in light of the tragic attacks in both countries) to similarly sunny destinations like Spain and Bulgaria, Thomas Cook managed a 1% rise in Q1 revenue to £1.4 billion whilst shrinking its operating loss by 11% to £49 million. This news seemed to put Thomas Cook back on the road to recovery, and by the start of March the stock had re-crossed the £1 mark.


(Source: IT-Finance.com 12/05/2016)

However, March turned out to be a rather ugly month for the company, for a variety of reasons. A downgraded rating from Citigroup on the 16th March sent the stock over 6% lower to 95p, before the terrorist attacks in Brussels on the 22nd helped erode the company’s price even further, at one point hitting 86p. In a moment of bleak coincidence the 22nd was also the day Thomas Cook revealed its latest trading update, the company prophetically warning that customers were delaying booking holidays due to uncertainty over safety in previously popular destinations, leading to a 5% drop in summer bookings year-on-year. Thomas Cook now sits at a current trading price of 89p (IT-Finance.com, 12/05/2016).

So far the travel sector has been a mixed bag this earnings season. easyJet managed to see a 0.3% rise in half year sales but slipped to a £24 million loss for the period as it continued to deal with the effects of both the global terror threat and the falling value of the pound. TUI, meanwhile, was far healthier, with a 16.3% jump in earnings and a 2.7% rise in turnover. Thomas Cook has largely underperformed its rivals in the last few months, so it will be interesting to see how its half year figures compare next Thursday.

Thomas Cook Group PLC has a consensus rating of ‘Hold’ with an average target price of £1.21.