Thomas Cook must start producing consistently strong financial results instead of headlines in the next few months, according to analysts in the City.
The shock departure of Cook chief executive Harriet Green (pictured) last week sent the company’s share price tumbling by more than 20%, but these losses had largely been recovered as TTG went to press.
Several brokers including Barclays Capital, Credit Suisse and Berenberg Bank downgraded Cook’s stock in the wake of Peter Fankhauser taking over from Green with immediate effect.
Independent travel industry analyst Douglas McNeill said that the company was “out of the emergency ward” and now needed to “settle down and become more of a normal company” through consistently improving its results.
“I think the strategy was well conceived and will remain in place,” McNeill told TTG. “I don’t expect major changes as a result of the management change. Chairman Frank Meysman has been associated with that strategy.
“In many ways, Cook is trying to emulate what Tui has done in the past few years. Tui is much further along the road, which is both good and bad for Cook as it has a lot of work to do to catch up, but it also gives a lot of scope for improvement.”
"This is a big, monolithic machine that is difficult to turn around. Others in the online world are far more fleet of foot"
Wyn Ellis, travel and leisure analyst at broker Numis Securities, agreed that Cook was still lagging behind arch-rival Tui.
“Cook is still structurally challenged - particularly by the online segment,” he said. “This is a big monolithic machine that is difficult to turn around. Others in the online world are far more fleet of foot. It’s challenging for Cook to adapt its model.
“Tui embraced the internet earlier and its website seems much easier to use than Cook’s. Green was championing a digital approach with a revamped website, but it still has a lot of catching up to do.”
Analysts at Berenberg said they had “never been fans” of Cook’s business model as it was operating in a “structurally challenged industry”, but added “the prospects for positive earnings momentum were building”.
Citigroup urged clients to continue buying Cook’s shares although the broker cut its price target for the stock from £2.50 to £1.40 due to “the combination of unexpected management change, another downgrade and the ever present risk of geo-political headwinds”.
