Europe's second-largest travel firm Thomas Cook(LSE: TCG) will be announcing its full-year results later this month, and I for one expect to see things improve after several years in the doldrums. Last year the company posted a pre-tax profit for the first time in five years, but look beneath the surface and you'll see that underlying earnings actually fell by more than 20%.
No Turkish Delight
At the end of September, the FTSE 250 company completed another financial year with management far more upbeat regarding the outlook. The travel firm continues to experience good demand for its holidays in the UK and Northern Europe, but this has been offset by weaker demand in Germany, particularly to Turkish destinations due to security concerns. The numbers confirm the healthy demand and Turkey-related problems as the group's bookings, excluding Turkey, were up 8% year-on-year, but down 4% with Turkey added back in. Personally I don't see this as a problem. Memories are short, and as time goes on I expect demand to return to previous levels, as long as no other terrorist or political upheavals happen.
I think Thomas Cook is on the road to recovery, and the City seems to agree. Consensus forecasts suggest that revenues should start to pick up, rising from £7.8bn to £8bn for the year just ended, with a further increase to £8.2bn for the current year to September 2017. Analysts are also expecting the travel firm to treble its pre-tax profits for the year to £155m. After a 40% share price slump this year, Thomas Cook looks good value at just seven times earnings for fiscal 2017. Contrarians might be tempted to take a dip ahead of those full-year results on 23 November.
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Another mid-cap firm finding it tough going over the last few years is temporary power provider Aggreko(LSE: AGK). The Glasgow-based firm has seen its share price drift lower in recent years, sliding from all-time highs above £24 in 2012 to recent levels below £8, with the lower oil price continuing to impact a number of its key markets. Although revenues have remained steady over the same period, pre-tax profits have declined from £367m to just £226m reported for 2015.
First-half results were disappointing, with the power firm reporting a 31% drop in pre-tax profits to £61m on revenues of £685m, 12% lower than H1 2015. However, the Rental Solutions business is seasonal and normally weighted to the second half of the year, with the Industrial Power Solutions arm also expected to pick up in the latter part of the year as it starts to see the benefits of work won in Eurasia and the Middle East.
Nevertheless, the City doesn't expect a return to growth until 2017 when revenues are forecast to be much healthier at £1.7bn, with a 12% boost to underlying earnings. At current levels this would leave Aggreko trading on a very attractive price-to-earnings ratio of 11.
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Bilaal Mohamed has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.