Why the Tui share price could continue to smash the FTSE 100 this year

So far this year, shares in international travel group Tui(LSE: TUI) have smashed the UK's leading blue-chip index FTSE 100's performance.

Specifically, year-to-date the Tui share price has gained just under 12% excluding dividends, compared to a return of -1.1% for the FTSE 100. And I expect this performance to continue as Tui builds on its dominant position in the European travel market.

Seasonal improvement

Back in February, it announced to the market that its turnover increased by 9% in the first quarter of the year and the group's seasonal loss more than halved with EBITA (earnings before interest, tax and amortisation) hitting EUR25m versus a loss of EUR60m in the same quarter of the previous year.

As my Foolish colleague Peter Stephens reported at the time, the company also revealed that its outlook for the full year looked bright thanks to the overall uptick in demand from customers.

Today the company reaffirmed this positive outlook. Thanks to a robust trading performance during its fiscal first half, adjusted EBITA for the second quarter narrowed to EUR134m from EUR154m loss a year ago. This performance helped the group to record an overall adjusted loss before interest, taxes and amortisation of EUR157m for the six months to March 31, compared with a loss of EUR214m a year ago.

Commenting on the figures, CEO Fritz Joussen said: "At growth of 26% in our operating result and 7% in turnover, TUI Group concludes the first half of financial year 2018 with a very strong set of results." He went on to say that, thanks to these figures, the company is now well and truly on track to hit its full-year target of increasing EBITA by at least 10%.

However, while the company believes that it can grow EBITA by 10% in fiscal 2018, City analysts have pencilled in a more cautious estimate, forecasting a full-year decline in earnings per share of 10%, although analysts are expecting net profit to increase by 13% for the period. The seasonal and volatile nature of the holiday industry goes some way to explaining these different figures.

Size is key

While City analysts might be cautious about the outlook for Tui, I'm more optimistic on the firm's potential. Since merging with its German parent company in 2014, it has been able to leverage its position as the world's largest holiday operator, saving around EUR45m a year and giving customers more choice.

What's more, the group's increased size gives it more firepower to invest in the areas where it sees the best potential for growth.

For example, this year alone management has already approved the construction of two new ships for the cruise business, which reported an increase in profit for the first half of 23%.

As the group continues to invest in its growth, I believe the company can continue to grow earnings at a double-digit rate for the foreseeable future. This earnings growth, coupled with Tui's current dividend yield of 3.6% (set to grow at an average rate of 10% per annum for the next two years) lead me to conclude that the Tui share price is highly likely to continue to smash the FTSE 100 this year.

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Rupert Hargreaves owns no share mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.