Berenberg downgrades Thomas Cook on transformation hopes falter

28th Nov 2014 09:29

Berenberg has lowered its rating for Thomas Cook Group (TCG) from 'buy' to 'hold', saying that the travel tour operator's ongoing transformation is "losing its gloss"."We have never been fans of the TCG business model and have always seen this as a structurally challenged industry," the broker said.It said it had stuck with its positive stance on the shares, thinking that the prospects for positive earnings momentum were building, based on improved cost savings, the recent drop in the oil price and easing currency headwinds."However, TCG's full-year results [out on Wednesday] make these catalysts for a change in earnings momentum look like a forlorn hope and we downgrade to 'hold'," Berenberg said.The broker lowered its price target for the shares to 130p, from 165p previously.It said that the results and accompanying outlook "made for miserable reading", as well as the resignation of chief executive Harriet Green after just two years on the job."TCG remains in the middle of a transformational restructuring where results thus far are disappointing. To combat the competitive intensity TCG is undergoing, a major reorganisation has been initiated which involves completely reshaping how the company does business," Berenberg said."The costs of the restructuring are significant while the steps being taken are not so far seeing any easing in any of the challenges faced."The stock, up 0.8% at 120.1p by 09:40 on Friday, was still nearly 13% lower than where it was on Tuesday prior to the results.