Credit Suisse slashes Thomas Cook price target on geopolitical pressures

Credit Suisse slashed its target price on shares of Thomas Cook as a result of the toll which geopolitical pressures were taking on the company's bookings.

The Swiss broker said the travel&leisure operator's first half results had been good, further pointing out that further refinancing had been achieved.

However, booking trends - impacted by geopolitical events in both source markets (Brussels) and destinations (Turkey) - had pushed booking trends 5% lower year-on-year.

As a result, the company's guidance for full-year earnings before interest and taxes had come in at between £310m to £335m, excluding a favourable tail-wind from currency translation effects to the tune of £20m (consensus: £343m).

"The c£40m difference principally reflects around £10-15m from weaker Belgian trading post the Brussels airport attack (Belgian 2015 EBIT £18m) and £20-25m from weakness in Condor (the German airline), which is adapting to material schedule changes away from Turkey and broader competitive challenges in a market facing high supply growth."

Credit Suisse also estimated bookings in Turkey had fallen by between 40% to 50%.

Analyst Tom Ramskil cut his target price on the stock from 135p to 100p, but kept his recommendation on the shares at 'outperform'.

The analyst lowered his full-year reported EBIT target for the company to £320m.

Ramskil justified his decision regarding the latter on the basis that "key changes in the business remain in evidence" thereby supporting his estimates for Thomas Cook's earnings per share to continue growing at a compound annual growth rate of 23% between 2015 and 2018, albeit adding that "we fully acknowledge EPS risk remains high".