Stock of the day 19/11/2015 – Thomas Cook Group PLC

In a sector that is struggling for tragic reasons Thomas Cook has been one of the worst hit.

Can things turnaround with the company’s full year 2015 earnings release next Wednesday?

After a dismal 2014 that culminated in the surprising, and stock-hurting, departure of CEO Harriet Green, Thomas Cook entered 2015 at £1.27. And, against the odds, things looked good. Following lateral trading across January and February (with, admittedly, a brief dip around Thomas Cook’s limp Q1 results), news at the start of March that Chinese conglomerate Fosun had bought a 5% stake in the company cleared the stock for take-off, jumping nearly 30% in the following week to tickle £1.60.


(Source: IT-Finance.com 19/11/2015)

Whilst Thomas Cook fell away from these highs as March turned into April, bouncing between £1.45 and £1.50 for most of this period, the Tory election win in May soon set a fire under the stock once more, leading it to an 11 month high of £1.62. However, the company soon through a spanner in its own works with its half year results in May; the poor handling of the death of two children on a Thomas Cook holiday, including a ham-fisted attempt at a (non)apology by CEO Peter Fankhauser, understandably overshadowed the fact the company had narrowed its losses to £173 million from £187 million, with a 15% increase in luxury holiday bookings for summer.

This public toxicity sent the stock back to £1.45 by June, before the beach shootings in Tunisia and the turbulence in Greece pushed the stock to £1.20 by the end of June. July then saw Thomas Cook formalise these issues, warning of a £25 million profit-cost due to the impact of the issues in Tunisia and Greece, with a further £39 million hut from currency headwinds. Add onto this the China-inspired chaos of August, and Thomas Cook hit a 2015 (and 10 month) nadir of £0.98 on Black Monday.

From this low Thomas Cook managed to rebound to £1.20 by the end of September, aided by a trading update that highlighted both the fact that the firm’s winter bookings had been more robust than last year and that it had sold 91% of its overall summer 2015 season capacity. However, after hitting £1.25 by end of October, tragedy struck once again; first the downing of an Egypt to Russia flight at the start of November, and the subsequent suspension of flights to the country, pushed the stock to £1.10, before the recent attacks in Paris left saw it hit £1.01. The company currently sits at a current trading price of £1.07 (IT-Finance.com, 19/11/2015).

In terms of Thomas Cook’s full year figures on Wednesday, analysts are expecting a 5.7% drop in revenue to £8.08 billion and a 21% fall in adjusted net income to £128 million. Investors will also want to know the impact of the horrors in Egypt and France, as well as the final cost of those issues arising from Tunisia and Greece.

Thomas Cook Group has a consensus rating of ‘Hold’ with an average target price of £1.37.