Shares in Tui were the biggest fallers on the FTSE 100 yesterday after analysts warned that full-year results could fall below expectations.
Morgan Stanley analysts, who previously noted the positive impact that Tui shares have felt from the collapse of rival Thomas Cook and recent Brexit hopes, said they expected the company’s earnings to be below consensus forecasts.
Tui closed the day down 75.7p, or 7%, at 990.8p.
Jamie Rollo, of Morgan Stanley, said: “There is no guidance yet for full-year 2020 [earnings before interest and tax], which will come with the December 12 full-year results, but consensus is for €1.1 billion.
Five-day Tui share price via Google finance
“We see a full-year 2020 guidance range of €800 million to €1 billion as realistic, 10% to 30% below consensus.”
The grounding of the Boeing 737 Max is likely to continue to weigh on the company’s performance, with costs expected at €150 million this financial year, three times the previous estimate of €50 million.
Related costs could rise to €350 million if the aircraft remains out of action beyond April next year.
Yet the failure of Thomas Cook could see a 30% improvement in Tui earnings per share.
“However, this depends on many factors, not least the UK economic environment not deteriorating, competitors response (Jet2 is also adding capacity), and consumer confidence in package holidays,” the investment bank said in a research note.
“Near-term, Tui is cautious, and is likely to increase marketing costs and reinvesting to improve its technology systems.
“This could mean the benefit of this capacity increase is not immediately obvious, and certainly not in FY guidance, so we think the FY20 EBITA guidance range could be very wide.”
The uncertainty around what Thomas Cook’s collapse may mean was expected to contribute to the wide guidance, together with the high degree of uncertainty in the UK “even if Brexit is resolved” because of the resulting shift to later bookings and its impact on margins.
The City comments came as Tui outlined new routes and increased frequencies across multiple UK regional airports as its adds two million more seats for summer 2020.
More: Updated: Tui adds more routes and frequencies for summer 2020
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