Broker snap: Thomas Cook downgraded as turmoil escalates

22nd Feb 2011 13:16

Panmure Gordon has downgraded travel firm Thomas Cook as it struggles to identify any near-term catalysts to the share price following the recent turmoil in the Middle East.Thomas Cook noted in its first quarter statement that the political unrest in Tunisia and Egypt would have an impact on the following quarter's profits by around £20m. Panmure Gordon responded by cutting its full year earnings per share forecast by 6.7% to 23.67p from 25.36p previously. Looking at earnings multiples, the shares trade at a 23% discount to sector peer TUI Travel but both companies appear to be in the same boat - or aeroplane, if you prefer. "Unrest has since spread to Bahrain, Libya and Morocco, the latter a particular concern given its increasing prominence as a winter sun destination," says the broker.Furthermore, the travel firm warned in the report that rising fuel prices are of concern. These have since increased by an additional 8% due to the geopolitical backdrop, creating further pressure on 2012 margins if elevated prices are sustained.Thomas Cook's rating is cut to a 'hold', from 'buy', a target price of 203p is confirmed.