TUI AG Q3 Results Climb; Raises FY25 Underlying EBIT View, Sees Revenues At Low-end Of Target Range

TUI AG reported significantly higher third-quarter profit, with attributable results surging to €183.1 million and underlying EBIT up 38.3% to €320.6 million, driven by increased volumes and higher prices amidst robust demand. Consequently, the German leisure and travel company raised its fiscal 2025 underlying EBIT growth outlook to 9-11% (from 7-10%) at constant currency, while revenue growth is now expected at the lower end of its 5-10% target range, signaling strong profitability despite a slight moderation in revenue expectations.

Analysis

TUI AG demonstrated significant profitability growth in its third quarter, with attributable profit surging to €183.1 million from €52.4 million in the prior year, and earnings per share increasing 260% to €0.36. This performance was driven by a 38.3% year-over-year increase in underlying EBIT to €320.6 million. The top-line grew a solid 7.1% to €6.20 billion, supported by a combination of higher pricing and a 2% increase in customer volumes to 5.9 million, while maintaining a high 94% average load factor, underscoring strong operational execution and sustained consumer demand. Critically for the forward outlook, TUI has revised its fiscal 2025 guidance, raising its expected underlying EBIT growth to a range of 9% to 11%, up from the previous 7% to 10%. This upgraded profit forecast comes despite an expectation that revenue growth will now be at the lower end of the 5% to 10% target range, indicating a clear focus on margin expansion and pricing power over pure volume growth. The company also reaffirmed its mid-term ambition for 7% to 10% CAGR in underlying EBIT, providing a stable long-term outlook.

Key Decisions for Investors

• Investors should focus on the company's demonstrated pricing power and margin expansion, as evidenced by the raised EBIT guidance despite a moderation in revenue growth expectations.
• Consider the sustainability of high pricing and robust demand in the travel sector, as these are the primary drivers of the current outperformance and positive outlook for the fourth quarter.
• It is prudent to update valuation models to reflect the new fiscal 2025 guidance, incorporating the higher 9-11% EBIT growth forecast while adjusting for revenue growth at the lower end of the 5-10% range.