Qantas share price falls 4% despite huge profits and major share buy-back

The Flying Kangaroo is descending on Thursday following the release of its half-year results…

| More on:
Woman sitting looking miserable at airport

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • Qantas shares are falling following the release of its half-year results
  • That's despite the airline operator reporting a $1.4 billion profit
  • Not even a $500 million on-market share buy-back has been able to keep its shares from descending

The Qantas Airways Limited (ASX: QAN) share price has failed to take off on Thursday.

In morning trade, the airline operator's shares are down almost 4% to $6.22.

Why is the Qantas share price falling?

Investors have been selling down the Qantas share price on Thursday in response to the Flying Kangaroo's half-year results release.

For the six months ended 31 December, Qantas reported a 222% increase in revenue to $9.9 billion and an underlying profit before tax of $1.43 billion. The latter compares very favourably to loss of $1.3 billion in the prior corresponding period.

In light of this strong form, its much-improved balance sheet, and positive outlook, Qantas has decided to return up to $500 million to shareholders via an on-market share buy-back.

Broker response

Goldman Sachs has taken a look at the result and has given its verdict. It notes that the company's profit was a touch short of its expectations, which may explain some of the weakness in the Qantas share price today. It commented:

QAN adjusted PBT of $1,428m was 1% below GSe and 1% ahead of consensus (this compared with guidance of $1,350-1,450m. Revenues were 3% higher than expected, offset by higher than expected ex-Fuel opex and D&A. Group capacity was 1% below our forecasts, more than offset by a 3% unit revenue beat. Adjusted Net Debt was $2,398, which was 1% below our estimates and well below the $3.9-4.8bn revised target range (struck at 2.0-2.5x EBITDA assuming a 10% ROIC and was $4.2-5.2bn in August 2022).

Another item that caught the eye of Goldman Sachs was Qantas' capex spending. It highlights that this is ramping up quicker than it was expecting. Its analysts add:

FY23 Capex $2.6-2.7bn from (previously $2.2-2.3bn; GSe $2.3bn; Consensus $2.3bn), reflecting re-phasing of existing commitments for improved commercial terms. FY24 capex of expected to be $3-3.2bn vs GSe of $2.8bn (although we note that our FY24 ND was ~$600m below the bottom of the revised target range) and consensus of $3bn.

Nevertheless, as things stand, the broker has a conviction buy rating and $8.20 price target on Qantas' shares. Though, this could change once Goldman Sachs has updated its financial model.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Travel Shares

Man sitting in a plane looking through a window and working on a laptop.
Travel Shares

What does Macquarie think Web Travel Group shares are worth?

Is the broker bullish or bearish? Let's find out.

Read more »

A woman looks up at a plane flying in the sky with arms outstretched as the Flight Centre share price surges
Earnings Results

Web Travel share price rockets 13% on market leading full-year growth

Investors are sending Web Travel shares soaring today. Here’s why.

Read more »

Man sitting in a plane seat works on his laptop.
Travel Shares

$10,000 invested in Qantas shares 5 years ago is now worth

Let's see what happened if you were brave and bought the Flying Kangaroo's shares in 2020.

Read more »

Woman on a tablet waiting in for her flight in an airport and looking through a window.
Travel Shares

Why have Qantas shares outperformed Flight Centre shares by more than 100% over the past 12 months?

The two share prices are travelling in opposite directions.

Read more »

Man sitting in a plane seat works on his laptop.
Travel Shares

Qantas share price slips amid looming $121 million fine

Qantas continues to face legal issues stemming from the Covid pandemic years.

Read more »

A woman looks up at a plane flying in the sky with arms outstretched as the Flight Centre share price surges
Earnings Results

Up 78% since April, why is the Webjet share price taking off again today?

Webjet shares have soared 78% since 4 April and are lifting off again today. But why?

Read more »

a young woman looks at here phone as she strides out in an airport dragging her wheelie bag behind her and smiling widely.
Travel Shares

Would I buy Qantas shares right now?

This ASX travel share has flown higher. Is it a buy?

Read more »

a woman drawing image on wall of big fish about to eat a small fish
Mergers & Acquisitions

Guess which ASX All Ords stock just received a takeover offer

A private equity firm has its eyes on this stock.

Read more »