Broker snap: Thomas Cook is 'delivering', says Jefferies

28th Nov 2013 10:09

Jefferies has kept a 'buy' recommendation and 200p target price for travel operator Thomas Cook after the company's full-year results and near-term guidance came in much better than expected. The company said on Thursday that revenues rose 1.3% to £9,315m during the year to September 30th, while earnings before interest and tax (EBIT) were up 48.6% at £86m. Full-year EBIT were £10m above consensus forecasts, Jefferies said, "signifying a strong end to summer trading, despite Egyptian headwinds (which seem to be abating)". The broker added: "Winter trading has started relatively well and a policy of matching capacity with demand means pricing is flat to up in all markets. More importantly, management is maintaining capacity discipline into the main 2014 selling season. Although early days, summer 2014 is progressing according to plan."Cost savings during the year totalled £134m, well above the planned £110m, while a further £40m of cost savings have been identified for the cost-out and profit improvement plan known as 'Wave 1', bringing the total to £440m. Jefferies said that 'Wave 2' cost savings of £440m are also "much greater than we anticipated".Meanwhile, along with higher-than-estimated revenue growth targets through to 2015, the broker said that consensus upgrades in the region of 5-10% are in order following the results."Thomas Cook is delivering. Margins are improving, net debt has fallen and the balance sheet considerably strengthened, more cost savings are promised and, importantly, trading is robust. "Yet the shares still trade at a discount to its major competitor, TUI Travel. We think this is becoming increasingly difficult to justify, especially given the likely higher growth rates at Thomas Cook Group."The stock was 13.25% higher at 173.5p by 11:41.BC