Stock of the day 19/05/2015 – Thomas Cook Group PLC/Marks & Spencer Group PLC

Wednesday sees two classic British brands announce their results, with Thomas Cook Group PLC and Marks & Spencer Group PLC revealing their latest earnings releases before the bell.

Like its full year earnings back in November, there is a large chance that Thomas Cook’s half year 2014/15 earnings release will be overshadowed by factors outside the realm of its finances. After a disappointing 2014 was compounded by the shock departure of Harriet Green, who had been responsible for instigating much of the company’s turnaround, the company’s 2015 got off to a bit of a better start. The start of March saw Thomas Cook announced that Fosun, the largest private-owned conglomerate in mainland China, bought a 5% stake in the company. This caused shares to jump up 25% to £1.50 and lead to a rise that culminated in a £1.62 high last week. However, an ongoing scandal has caused to company to slip to a current trading price of £1.59.


(Source: IT-Finance.com 19/05/2015)

The revelation that the damages paid to the company after the death of two children from carbon monoxide poisoning at a Greek hotel recommended by Thomas Cook were more than 11 times higher than the damages paid to the parents, at roughly £3.5 million to £300,000. Whilst Thomas Cook has subsequently donating £1.5 million to Unicef, the negative press hasn’t abated; unsurprising given that £3.5 million minus £1.5 million doesn’t leave the zero sum figure many believe it should.

On top of this, statements from CEO Peter Fankhauser like ‘I feel so thoroughly, from the deepest of my heart, sorry but there’s no need to apologise because there was no wrongdoing by Thomas Cook’ don’t help. Rightly or wrongly, these aren’t the kind of comments the public like to hear, especially from a company that is meant to be in the business of providing the holiday of your dreams. Not a great pre-amble to its half year results, with analysts predicting an underlying loss improvement of only 3.7% to £180 million after disappointing first quarter bookings. This has lead Thomas Cook to receive a consensus rating of ‘hold’ with an average target price of £1.56.

In comparison, things are going a lot better for Marks & Spencer, a stock that like Thomas Cook has been similarly beleaguered in recent years, but one that is on the precipice of what many believe could be a big recovery as it prepares to announce its full year 2014/15 results. Since starting the year at £4.80, and dipping to a low of £4.41 in the first week of January, M&S has seen strong growth in 2015, leading to an intraday high of £5.88 on Tuesday, its highest price since the start of 2008.


(Source: IT-Finance.com 19/05/2015)

The fervour that has surrounded the company’s Autograph suede straight skirt, worn by Alexa Chung and Olivia Palermo, led M&S to install a waiting list for the product; more importantly, it reflects the slowly shifting tides surrounding its long-suffering, and much-maligned, clothing division, especially its troublesome Womanswear sector. This comes alongside a well-reviewed autumn/winter collection and signs that M&S may be on its way back to prominence beyond its successful food sector.

Importantly these changes are being felt on the company’s figures themselves, and if analysts are correct, then Marc Bolland can start to breathe a bit easier after 5 tough years at the helm of the British institution. Marks & Spencer is forecast a 4% increase in pre-tax profits for the year to £648 million with its burdensome, but significant, clothing division finally pulling its own weight after 14 consecutive declining quarters, with expectations of a 0.7% rise in final quarter like-for-like clothing sales alongside the same rise in like-for-like food sales. These figures would lead to a 3% increase in the company’s final dividend pay out to £0.11 with the chance for a £250 million special dividend. This has left Marks & Spencer with a consensus rating of ‘hold’ with a target price of £5.45.