More turbulence likely from first-half numbers from travel firm TUI on Wednesday

Aside from the TUI numbers, blue-chip firms including DIY stores group Kingfisher, contract caterer Compass Group and credit checking firm Experian will also issue updates on Wednesday

TUI plane
Analysts at UBS expect TUI to report an increased second-quarter underlying EBITA loss of €223mln

Investors will be bracing themselves for more turbulence from TUI AG’s (LON:TUI) first half results after the blue-chip holidays firm warned at the end of March that its underlying earnings (EBITA) for the year could fall as much as 26% due to the grounding of Boeing’s 737 MAX range of aircraft.

The travel firm said then that assuming the MAX planes were cleared to resume flights by mid-July at the latest, it would take a hit of around €200mln to its underlying EBITA for the 2019 fiscal year due to costs of replacing the grounded aircraft, higher fuel costs, and other disruption.

As a result, the company said it now expected underlying EBITA for the year to be around 17% lower than in 2018, having previously forecast a flat performance. However, if the aircraft was grounded for longer TUI said the figure could be as much as 26% lower.

In a preview, analysts at UBS said they expect to TUI to report a second-quarter underlying EBITA loss of €223mln, up from the €134mln loss posted in 2Q 2018.

On a divisional basis, the Swiss bank’s analysts expect the group’s tour operator business to report a loss of €320mln reflecting headwinds from the late Easter, as well as a weakening of end-markets year-on-year.

In Hotels, they expect pressure on revenue per available room (Revpar) in Spain and more flattish development for the Caribbean leading to EBITA of €69mln, down 19% down year-on-year, but EBITDA for its Cruises business is seen up 11% year-on-year at €61mln.

Warmer weather to boost Kingfisher sales

FTSE 100-listed Kingfisher PLC (LON:KGF) had a difficult 2018 with profits plummeting 52.8% on the back of struggles at its French DIY business Castorama and a tough UK retail market.

Following the poor performance, the company – also the owner of B&Q and Screwfix – has started a succession plan for chief executive Véronique Laury but a departure date is yet to be agreed.

Investors will be looking out for an update on the search for a new boss when the group reports its first quarter trading update on Wednesday. They will also be hoping for signs of recovery during the period.

UBS forecasts like-for-like sales growth of 1.7% for the first quarter, compared to a 4% drop reported the same period a year ago.

The Swiss bank said the recovery is largely based on weak comparisons with last year’s ‘Beast from the East’ snowfall affecting footfall.

It sees a 5% increase in like-for-like sales at both B&Q and Screwfix while it predicts a 2% decline for its French businesses Castorama and Brico Dépôt.

Another 'excellent quarter' from Compass forecast

Meanwhile, contract catering colossus Compass Group PLC (LON:CPG) is due to serve up solid half year results, following a first quarter trading update in February that showed cost cutting was helping offset lower volumes and higher costs at its UK business.

The blue chip firm saw Q1 organic revenue grow by 6.9%, led by North America and Europe, with the rest of the world slower.

The consensus forecast is for Compass to post 6.2% growth for the half year, with EBIT of £952mln.

For the full year, the company expects growth to be “slightly above the middle” of its target growth range of 4% to 6%, with modest margin progression, while Compass shares had risen 10% since start of year to an all-time high last month, but currently not much higher than level in June 2017.

Barclays recently downgraded the group for the first time in a decade, as the valuation had reached levels that made “upside feel more limited” and that they were now more cautious in the medium-term.

While the bank’s analysts expect “another excellent quarter of organic growth”, they were more negative about margins and noted the industry’s increasing capital requirements were a long-term threat.

Experian to see slowdown in growth

Shares in Experian PLC (LON:EXP) are at all-time high, having doubled in over the past three years, but Deutsche Bank in March downgraded the stock to ‘sell’ as it believed the shares were overvalued on the basis of its forecasts that the consumer credit reporter’s growth will soften in the next 12 months.

The German bank’s analysts forecast the blue-chip credit checking firm company posting organic growth of 8% when it reports results for the year to the end of March 2019.

The consensus range for the current year is for organic growth of 5%-8%, and they forecast growth of 5%, with a further slowing to 4% in the full year end March 2021.

Significant events expected on Wednesday:

Trading updates: Kingfisher PLC (LON:KGF), Spirax-Sarco Engineering PLC (LON:SPX), Hargreaves Lansdown PLC (LON:HL.), Crest Nicholson PLC (LON:CRST)

Interims: TUI AG (LON:TUI), Compass Group PLC (LON:CPG), Marston’s plc (LON:MARS), CYBG PLC (LON:CYBG), Tharisa PLC (LON:THA), SSP Group PLC (LON:SSP), Sanderson Group PLC (LON:SND), Ten Lifestyle Group PLC (LON:TENG), JPJ Group PLC (Q1) (LON:JPJ)

Finals: Experian PLC (LON:EXPN), British Land Company PLC (LON:BLND), Speedy Hire Plc (LON:SDY), Tavistock Investments PLC (LON:TAVI)

AGMs: Be Heard Group PLC (LON:BHRD)

Economic data: US retail sales; US industrial, manufacturing production; NY Empire State manufacturing index

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