TUI share price rise on strong Q3 earnings beat

TUI share price surged on Wednesday following the release of its third-quarter earnings report, which surpassed analyst expectations.

As of 4:08 AM (0808 GMT), TUI's stock was up 4%, trading at €5.768.

The company reported revenues of €5.787 billion, which aligned with consensus forecasts but was slightly below Jefferies' estimate of €5.790 billion.

The standout figure, however, was the underlying EBIT, which reached €231.9 million, exceeding expectations by 11%. This result surpassed the consensus estimate of €207.6 million and Jefferies' forecast of €185.3 million.

TUI Group Sees Strong Summer Performance

TUI also showed significant progress in reducing its net debt, which fell from €3.1 billion in Q2 2024 to €2.1 billion.

The trading environment has remained favorable, with summer bookings reflecting a positive trend. Booking momentum accelerated, compensating for a slight dip in pricing compared to the previous quarter.

Looking ahead, winter bookings are expected to follow a stable trajectory, with pricing levels holding strong. In terms of hotel performance, TUI anticipates a 10% increase in average daily rates (ADR) for the upcoming quarter, despite a modest 1% increase in occupancy rates.

Full-year guidance remains unchanged, with TUI projecting at least 10% revenue growth and a 25% rise in underlying EBIT. Jefferies' estimates are closely aligned, with expected sales growth of 12% and EBIT growth of 32%, targeting a total EBIT of €1.279 billion.

TUI Group Eyes Stable Mid-Term Growth

Mid-term targets for 2025/26 are also stable, with TUI aiming for underlying EBIT growth of 7-10% and maintaining net leverage significantly below 1.0x, alongside a return to pre-pandemic credit rating levels.

For summer 2024, TUI has seen strong booking performance, with 88% of its program already sold, compared to 60% at the same time last year. Year-on-year bookings are up 6%, an improvement over the previous 5%, supported by stronger demand in the German market.

The UK market is also performing well, with bookings up 5% and 90% of the season already sold. However, average selling prices (ASPs) have risen by 3%, down from a 4% increase in the previous quarter.

Winter 2024/25 bookings are showing steady demand, with 32% of the program already sold. Other markets are also seeing a positive start to the season.

TUI Group’s current valuation remains attractive, according to Jefferies, trading at a multiple of 5.8x FY24E PE, well below its historical average of 11.8x. Despite this, the company faces reinvestment risks across its key business units, and in the current macroeconomic environment, investors may want to consider other options.

For context, Jet2 is also trading at a similar 40% discount to its historical levels, making it a potentially more attractive investment with clearer growth prospects.

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Past performance is not indicative of any future results. This information is provided for informative purposes only and should not be construed to be investment advice.