The Flight Centre Travel Group Ltd (ASX: FLT) share price has come under pressure on Wednesday and is trading notably lower.
At one stage the global travel agent's shares were down as much as 4.5% to $39.92.
They have since recovered slightly, but are still down almost 3% to $40.62 at the time of writing.
Why is the Flight Centre share price trading lower today?
As well as coming under pressure due to concerns that the coronavirus outbreak could impact air travel demand, Flight Centre's shares were the subject of a reasonably negative broker note this morning.
According to a note out of Credit Suisse, its analysts have downgraded Flight Centre's shares from an outperform rating to neutral.
The broker has also trimmed its price target by almost 6% to $44.83. Whilst this still implies reasonable upside for its shares over the next 12 months, investors appear concerned with some of the comments that Credit Suisse has made.
Why did Credit Suisse downgrade Flight Centre's shares?
Credit Suisse made the move after looking through recent travel data. It notes that this data has been weak and trading conditions are being hampered by poor consumer sentiment.
And given Flight Centre's full year guidance is heavily reliant on a very strong second half performance, it appears concerned that there is a risk that its guidance could be too ambitious.
FY 2020 guidance.
In November the company revealed that trading conditions had been tough during the first half.
As a result, it advised that it expects first half underlying profit before tax to be in the range of $90 million and $110 million. This is a 22% to 36% decline on the $140.4 million achieved a year earlier.
However, a stronger second half is expected, with management targeting a full year underlying profit before tax between $310 million and $350 million. The mid-point of this guidance range represents a 3.8% decrease on FY 2019's $343.1 million.
It also means that over two-thirds of its full year profit before tax is expected to be generated in the second half.
But if trading conditions do not improve as much as management has forecast, clearly there is a danger of it falling short of its guidance.
As a result, Flight Centre will certainly be one to watch closely during earnings season in February.
