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Thomas Cook gets Bernstein upgrade ahead of 'good' summer
Liking the look of Thomas Cook's first-half results and the potential for a good summer, Bernstein upped its rating on travel group on Friday.
With Thomas Cook revenues growing more than 5%, narrowing its first-half EBIT loss as it continued to fine-tune its strategy, Bernstein saw benefits from industry tailwinds such the fall of Monarch and Air Berlin and the return of growth in North Africa and Turkey.
However, as there is still expected to be margin pressure in the UK through the second half Bernstein only upgraded to 'market-perform' from 'underperform', believing management "could be being cautious given the rapid return of growth in higher margin Turkey/North Africa, and the shorter-term benefits in the airline"
"Summer 2018 should be good for Thomas Cook," the broker said.
While analysts noted that Thomas Cook's differentiated focus appeared to be working, with the outsourcing of its more standardised operations to partners, such as Expedia, driving a "more reliable fee profit stream", a better customer proposition, and an allowance for "even more focus" on the differentiated product, the broker remained a little cautious ahead of the second half.
Thomas Cook would need currently seen elevated levels of demand for its package holidays to remain in place in order to continue growing at a rate which the market expects, the analysts said, revising the target price to 127p.