Broker snap: MENA and UK impact hits Thomas Cook

16th May 2011 10:56

Nomura has downgraded its forecasts for tour operator Thomas Cook as continued tension in the Middle East and North Africa (MENA) region and tough trading in the UK will likely affect earnings for the full year. While the group reported a first half operating loss of £166m broadly in line with Nomura's forecast of £170m, the year-on-year (y-o-y) difference was £36m worse, given the later timing of Easter and the impact of the MENA situation. While European businesses are performing better y-o-y, the UK - which accounts for 30% of earnings before interest and tax (EBIT) - is having a tough time with losses up £42m. The Japanese broker reduces its 2011 EBIT estimates by 5%.The target price falls to 235p, from 250p, but a 'buy' rating is kept, with analyst Simon Larkin noting that the current share price "demonstrates to us just how far sentiment has sunk with no credence being ascribed to management targets. This seems overly bearish to us."---BC