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Transat shares surge

Shares of Transat A.T. surged 10 per cent on Monday to the highest level since early 2015 after the travel company signalled that it is having a significantly more profitable summer season than it had expected.

The Montreal-based company's shares rose to $8.79 in intraday trading on the Toronto Stock Exchange, up 83 cents from Friday's close. The stock hasn't traded above $8.80 since January 2015.

Transat said its third-quarter results will show "significantly higher" adjusted earnings than during the comparable period last year.

Spokesman Christophe Hennebell said the results anticipated in two months ago when it issued its previous outlook and second-quarter results did not prove to be accurate.

At the time, Transat estimated overall results for the six months from May through October would be similar to last year. But revenues to July 31 have turned out superior to last year, especially since mid-June.

"The revenues are higher, the costs are slightly lower and the effect is increased by the fuel and currency effects," he said in an interview.

Since the company is in a blackout period before the release of its results Sept. 7, Hennebell declined to provide details, including whether the improvement was due primarily to "sun" destinations or the transatlantic market, which is largest in the summer months.

Transat said this year's third-quarter adjusted net income will be similar to the $26.9 million posted two years ago, and significantly higher than the $2.5 million reported in last year's third quarter.

The 71 cents per share outlook would be substantially higher than the 10 cents per share anticipated by analysts.

Analyst Mona Nazir of Laurentian Bank Securities said the return to historical levels of profitability would be very positive for a company that has made a series of strategic changes over the last few years.

She said Transat's ability to significantly increase its profitability speaks to its earnings capability.

"The combination of $450 million plus in cash, a potential return to positive EPS for the year, alongside strong tailwinds, may cause some investors to begin to pay attention to the Transat story once again," Nazir wrote in a report.



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