Dart Group, the owner of the Jet2 airline and package holidays business, is expected to report a 27% increase in pre-tax profit for the year on Thursday despite a tough travel market.
Jefferies predicts pre-tax profit of £171mln on sales of £2.1bn for 2019 financial year. That compares to pre-tax profit of £134.5mln and sales of £2.39bn last year.
Like the rest of the travel sector, Dart has been grappling with subdued consumer spending and competition from online rivals.
In an April trading update the company said forward bookings for summer this year in its travel business, though positive, reflect “some consumer uncertainty” and more competitive pricing for its flight-only and package holiday offerings.
Nevertheless, it expects profit before foreign exchange revaluation and taxation to be “slightly ahead” of market forecasts.
“We like Dart Group's laser focus on customer experience, robust airline grounding, fresh tour operator proposition and investment for growth, which we think will position it well in the long term,” Jefferies said.
“As such, we see scope for impressive market share gains to continue.”
However, the investment bank added that it does not think Dart is immune to the weak industry backdrop and expects margins will come under pressure in the coming year as Jet2 lowers prices to gain market share.
Jefferies said it expects the weak summer Dart experienced this year will continue.
A stronger 2018 summer, however, will boost margins for the 2019 financial year with Jefferies expecting a 70 basis point increase in the EBIT margin. In 2020 margins will fall, dragging pre-tax profit down to £142mln, Jefferies projects.
US inflation eyed amid rate cut bets
On the economic data front, official US consumer price inflation figures will be closely eyed by the market amid expectations of an interest rate cut at the end of this month.
Economists have forecast an annual rate of inflation of 1.6% in June, easing back from 1.8% in May and further away from the Federal Reserve's target of 2%.
On a monthly basis, inflation is estimated to drop to 2.0% in June from 0.1% in May.
While the consumer price index is not the Fed's preferred measure of inflation, the data is certainly taken into account when deciding monetary policy.
Fed chair Jerome Powell signalled a potential interest rate cut at the next policy meeting on Wednesday, saying "it appears that uncertainties around trade tensions and concerns about the strength of the global economy continue to weigh on the US economic outlook".
Oanda analyst Edward Moya said: "The economic outlook has not improved in recent weeks and that pretty much signals a rate cut at the July 30-31 FOMC meeting."
He added: "Markets are convinced that the Fed will deliver a 25-basis point rate cut this month, but if we see softer than expected inflation data tomorrow and if the advance second quarter GDP reading comes in well below 2.0% on July 26th, we will see the case grow for the first cut to be a 50 basis point one."
Significant announcements due on Thursday:
FTSE 100 ex-dividends: None
Economic data: RICS housing market survey; US weekly jobless; US CPI