Will Thomas Cook Group plc Surprise easyJet plc, Whitbread plc, Unilever plc And Diageo plc After Q1 Update?

Does Thomas Cook Group plc (LON:TCG) (LSE:TCG.L) have greater investment appeal than easyJet plc (LON:EZJ) (LSE:EZJ.L), Whitbread plc (LON:WTB) (LSE:WTB.L), Unilever plc (LON:ULVR) (LSE:ULVR.L) and Diageo plc (LON:DGE) (LSE:DGE.L)?

Thomas Cook Group plc
Thomas Cook Group plc

Thomas Cook Group plc (LON:TCG) (LSE:TCG.L) has released a Q1 update to investors today. Revenue has increased 1% to £1618 million, with growth in holidays to Greece, Spain and long-haul destinations. Its gross margin is 10 basis points higher at 22.1%, which reflects its focus on own-brand and selected partner hotels. This has allowed underlying EBIT to improve £1 million to a loss of £49 million.

Current trading is on track. Winter 2016/17 is 82% sold, which is as expected. Summer 2017 is 31% sold, with bookings 9% ahead of last year. In response to strong demand, the offering to smaller European destinations and Greece has been expanded. This dovetails with a greater focus on digital. Online bookings increased 20% in the UK and 40% in Germany in Q1.

Thomas Cook has taken measures to address Condor’s challenges and expects the benefits to start being seen in H2. It is still cautious about the rest of the year, given the uncertain political and economic outlook. Although it is relatively early in the selling cycle for summer holidays, it expects full year operating results to be in line with current expectations.

In the last six months, shares in Thomas Cook have risen over 40%. That’s ahead of consumer peers such as easyJet plc (LON:EZJ) (LSE:EZJ.L), Whitbread plc (LON:WTB) (LSE:WTB.L), Unilever plc (LON:ULVR) (LSE:ULVR.L) and Diageo plc (LON:DGE) (LSE:DGE.L). easyJet is down 13%, Unilever has lost 6% of its value, Diageo’s shares are 3% up, while Whitbread’s stock price is 1% firmer.

In my view, Thomas Cook has a sound strategy, but faces an uncertain outlook. I think it could experience a difficult 2017 if Brexit affects consumer confidence. Therefore, I’d rather own a more diversified stock such as Whitbread, Unilever or Whitbread. But given their low valuation, Thomas Cook’s shares could still have long term investment appeal in my view.

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