Thursday tips round-up: Thomas Cook, Wolseley

27th Nov 2014 09:05

Thomas Cook reported a pre-tax loss of £114m yesterday, which markets had been expecting to turn into a pre-tax profit of £270m next year. Yet investors were already worried that overcapacity in this sector will hurt the turn-around story. Even if bookings help up prices could suffer. The shock announcement of chief executive Harriet Green's departure will do little to assuage their concerns - quite the opposite. The company was also vague regarding the direction of travel going forward, saying it expected "more measured" growth in profits. On net debt it did a tad better, guiding towards debt between £100m and £150m by the end of September next year.The outfit faces a new problem as well, in the wake of the UK Supreme Court's ruling that airlines are liable for delays. All of the above means the recovery at the travel firm has been blown off course. Sell, says the Daily Telegraph's Questor column.Builders' merchant Wolseley's performance in the US continues to be stellar, with like-for-like sales running at record levels. The company is also benefiting from a strengthening US dollar. Furthermore, the group continues to be highly cash generative, with highly manageable debt levels. Significantly, the company has managed to rid itself of the majority of its lacklustre operations over on the Continent. The story in the UK is better, with an improved performance expected in the spring. Despite trading on 16 times earnings the shares are worth buying in due course for the long-term, writes The Times's Tempus.