CIBC Analyst: Expect Strong 2Q Earnings from Transat

Transat A.T. (TRZAF.PK), Canada’s largest charter tour operator, will deliver its second quarter earnings today, and Chris Murray, CIBC World Markets analyst, says he is expecting a stronger showing than last year - although he is not ruling out additional write-downs on the C$154.4-million it had tied up in the troubled asset-backed commercial paper market.

Mr. Murray said he expects earnings per share of C$1.24, excluding the potential for further write downs, up from C$1.21 last year, and well above the Street’s consensus of C$1.09.

In a note to clients on Wednesday, he said:

The second quarter is generally the company's strongest and we expect that pricing has stabilized for all destinations other than Cuba.

We expect that starting this summer Transat will be able to capitalize on its U.K.-Canada tour operator, Canadian Affair, which the company purchased in 2006. Carriers are planning to provide less capacity to the U.K. this summer and we are forecasting traffic will be up slightly, leading to stronger earnings.