Full-year earnings are still expected to drop but the travel company is set to be the biggest beneficiary of Thomas Cook’s demise.
TUI describes business as resilient during turbulent market
- 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.
If you're looking to invest in the travel & leisure sector and you're not currently a customer of The Share Centre, sign up today. You can also view the full range of travel & leisure companies and their share prices.
All information given including prices, yields and our opinion is correct at the time of publication. Our opinions on investments can change at any time and for our latest view please go to www.share.com. To understand how our Investment research team arrive at their views please read our Investment Research Policy.