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TUI Jumps to Four-Month High on Higher Hotel Forecast

TUI AG, the owner of Europe’s largest travel company, rose to the highest level in four months in Frankfurt as the company boosted its full-year forecast for its hotel unit after lifting prices and lowering costs.

TUI expects underlying earnings before interest, taxes and amortization at the business to rise “significantly” this year, the Hanover, Germany-based company said in a statement today. Earnings on that basis at the whole company rose to 102.3 million euros ($126.4 million) in the three months through June, it said, beating the 95.5-million euro average of six analysts compiled by Bloomberg.

TUI, which is spinning off businesses to focus on tourism, said full-year sales will rise “moderately” and operating profit will increase after profit at the hotels division more than doubled in the period. The company is also considering making an offer for the Central European tourism operations of its TUI Travel Plc unit, people familiar with the talks said this month.

“We are seeing our business performance outlook more than confirmed and will achieve our targets for the year despite the European debt crisis,” Chief Executive Officer Michael Frenzel said in the statement.

TUI shares rose as much as 6.9 percent to 5.78 euros in Frankfurt, the highest intraday price since April 3. The stock traded up 6.3 percent as of 11:02 a.m.

Higher Revenue

Sales gained 7.7 percent to 4.72 billion euros. That beat the 4.6 billion-euro average of seven analysts’ estimates compiled by Bloomberg.

TUI Chief Financial Officer Horst Baier said in a conference call today that he is “confident” for fourth-quarter earnings. Baier is “not very much concerned” by the company’s financial exposure to Greece, he said. Bookings to the country have picked up, the CFO said.

The tourism division, which includes a controlling stake in TUI Travel as well as investments in holiday resorts and cruise ships, reported underlying Ebita of 122.4 million euros compared with 104.5 million euros last year. Sales at TUI Hotels & Resorts rose 15 percent while revenue at TUI Cruises gained 22 percent. The company had previously forecast underlying Ebita at the hotels business would improve this year.

The underlying loss before interest and taxes at the company’s central operations, which include the real estate companies and corporate center functions, widened to 20.1 million euros from 8.3 million euros because of foreign exchange-induced expenses, TUI said.

The company could become debt-free in the medium term, Baier also said.

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