TUI describes business as resilient during turbulent market

Full-year earnings are still expected to drop but the travel company is set to be the biggest beneficiary of Thomas Cook’s demise.

Article updated: 24 September 2019 11:00am Author: Ian Forrest

  • Evidence points to TUI being biggest beneficiary of Thomas Cook collapse.
  • Growth seen in holiday experiences business yet full year earnings expected to drop by 26% due to headwinds.
  • As the company continues to deal with challenges, we recommend the shares as a ‘Hold’.

Amidst all the chaos caused by the collapse of Thomas Cook its rival TUI has today described its business as “resilient” but admitted market conditions remain challenging. While in the short term it will support holiday makers stranded by Thomas Cook, the longer term impact will see TUI as one of the biggest beneficiaries of its rival’s demise. The group has seen good growth in its holiday experiences business but still expects its full-year earnings to drop by up to 26% due to a range of factors, including the long grounding of the Boeing 737 MAX aircraft, overcapacity and Brexit uncertainty.

The market saw the update as positive with shares rising slightly in early trading, which follows a 6% uplift yesterday in the wake of the Thomas Cook failure. All the evidence points to TUI being the biggest beneficiary of that but it is always difficult to accurately predict how big the benefit may be and when it will show through in results, so investors should not jump to any major conclusions just yet.

Our view on TUI - Hold

In the meantime the company clearly has plenty of other challenges to deal with. We continue to recommend the shares as a ‘Hold’ for those willing to accept a medium to high level of risk.

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Ian Forrest

Investment Research Analyst

Ian’s background in investments, financial journalism and research has seen him advising private investors on equities and helping to manage portfolios. His qualifications include the Certificate in Financial Planning and the Chartered Institute for Securities & Investment’s Investment Advice Diploma.