Credit Suisse upgrades Thomas Cook to 'outperform'

12th May 2015 10:53

Credit Suisse said it sees an attractive risk-reward balance at Thomas Cook Group as it upgraded its rating on the travel tour operator from 'neutral' to 'outperform'.The bank pointed out that TCG has underperformed sector rival TUI by around 45% since September last year and now trades at a 30% discount on a price-to-earnings basis.Credit Suisse has predicted a "stable and improving" earnings outlook at TCG and forecasts a 14% compound annual growth rate in operating profits over the next three years.The bank has lifted its target price for the shares from 159p to 180p, which implies 18% upside potential from current prices.One factor behind Credit Suisse's upgrade was the recent purchase of a 5% stake in TCG by China's Fosun, which it said supports the company's product plans.Meanwhile the potential for refinancing could improve earnings, while the fuel and currency cost outlook is the best it has been for 10 years, the bank said.TCG's stock was up 3.1% at 157.7p by 10:52.