Travel giant TUI smashes earnings expectations as investors decide to exit London

Passengers board the TUI bus at Palma de Mallorca Airport on June 18, 2020 in Palma de Mallorca, Spain.

Clara Margais | Getty Images

German travel giant TUI reported quarterly profit of 6 million euros ($6.46 million) on Tuesday, defying expectations on the back of positive travel demand.

According to LSEG data, swing to profit largely exceeded analysts’ consensus forecast of a €102 million loss in underlying earnings before interest and tax (EBIT). In the same quarter last year, Europe’s largest tourism operator had recorded a net loss of 153 million euros.

The group’s first-quarter fiscal revenue reached a record 4.3 billion euros, up 15% from a year earlier, driven by higher demand at higher prices and tariffs.

Shares rose as much as 6% after the market opened, but have since pared gains to just over 3% in early trading in Europe.

“We are on track, we are acquiring customers and we are growing. We are accelerating our transformation quarter after quarter. We have goals that we are consistently implementing,” TUI CEO Sebastian Ebel said in a statement.

“In a constantly difficult context, people’s high willingness to travel guarantees strong economic development in all areas of the Group.”

Tui expects to post operating profit growth of at least 25% in the 2024 financial year and is targeting a compound annual growth rate of 7-10% over the medium term.

Over the three months under review, a total of 3.5 million guests traveled with TUI, compared to 3.3 million the previous year.

Analysts at Deutsche Bank noted Tuesday that TUI’s share price “still suffers from a very significant discount,” trading at just 0.2 times enterprise value to sales and an estimated price-to-earnings ratio of 5.3 times for 2024, compared to a historical average of 0.5x. EV/Sales and 14x P/E.

“Given these particularly low valuation multiples, the stock’s performance since the beginning of the year has been particularly disappointing (-3.9% since the beginning of the year for the German listing and -5.5% for the London listing) compared to both the Stoxx 600 (around +1.8%) and the Stoxx T&L (around +9.2%)”, said Deutsche Bank analysts, reiterating their “buy” rating on the stock.

Abandoning the London listing

Tuesday’s bumper earnings report came as Tui shareholders gather for an annual general meeting at which they will vote on whether the company should delist its shares from London markets in favor of a full listing in Germany.

The group currently holds a dual listing between Frankfurt and the UK, but its board of directors has recommended abandoning the London Stock Exchange, where just 10% of its shares are held, citing a “significant” drop in liquidity in UK stock markets in the last few years.

The AGM will begin at 10.30am London time.

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