Broker snap: Panmure prefers Thomas Cook over TUI Travel

7th Aug 2013 11:35

Panmure Gordon has maintained its 'hold' recommendation for travel operator TUI Travel despite strong trading in the third quarter, as it reiterated its preference for sector peer Thomas Cook.The broker said that fiscal third-quarter trading was strong as expected driven by the UK and Nordic regions and the increase of Unique holidays."Underlying operating profit increased by £13m year-on-year in Q3 to £87m, implying our forecast c£11m H2 profit improvement year-on-year potentially has some upside pressure," Panmure said.Nevertheless, it did highlight that it was maintained its forecasts - which predict a broadly flat fourth-quarter performance year-on-year - at this stage due to tough comparatives in the fourth quarter and good recent weather (something which sometimes spells bad news for travel stocks).Panmure pointed out that TUI is trading at a premium to its favoured stock, Thomas Cook, yet holds less earnings growth potential."Whilst we believe TUI Travel is a strong operator with good long-term growth potential, in our view Thomas Cook offers more substantial upside from the improvement in underlying like-for-like trading, in addition to potential increases to cost savings targets and future dividend payments."A 315p target price for TUI was maintained.The stock was down 4.92% at 381.73p by 11:34 on Wednesday.BC