The Qantas Airways Limited (ASX: QAN) share price has risen more than 6% since the airline reported its FY24 result.
FY24 result recap
If you didn’t catch the result, here are some of the main highlights:
- Revenue rose by 10.7% to $21.9 billion
- Underlying profit before tax declined 16% to $2.08 billion
- Underlying profit/earnings per share (EPS) dropped 7.3% to $0.88
- Statutory net profit after tax (NPAT) dropped 28% to $1.25 billion
- Free cash flow sank 77.5% to $554 million
- Net debt worsened $1.2 billion to $4.1 billion
Fares lowered during the year as airlines returned to market capacity, spending on customer initiatives increased and freight revenue reduced.
Pleasingly, Qantas and Jetstar saw “significant improvements in operational performance and customer satisfaction across the year”.
Its fleet renewal continued with 11 new aircraft traffic during the year, including five Jetstar Airbus A321neo long range aircraft and two QantasLink A220s, as capital expenditure increased to $3.1 billion. The new fleet provide “improvements in operating cost, network flexibility, passenger comfort and emissions.”
The standout performance was the Qantas Loyalty division, which “continued to perform strongly” in FY24, with a record underlying EBIT of $511 million. This segment continued its expansion into holiday packages by purchasing the remain stake in online travel business TripADeal.
Share buyback
Qantas said it will distribute up to $400 million to shareholders in the first half of FY25 via an on-market share buyback. This can help increase the underlying value of each remaining Qantas share.
Outlook for the Qantas share price
The airline said it’s “seeing stable travel demand across the portfolio” with positive revenue momentum heading into the first half of FY25.
Group domestic unit revenue is expected to increase by between 2% to 4% in the first half of FY25 compared to the prior corresponding period.
Group international unit revenue is expected to fall between 7% to 10% over the same period as international capacity continues to recover, though the rate of decline is expected to slow in FY25. However, this is expected to turn positive in the fourth quarter of FY25 compared to the prior corresponding period.
Net freight revenue in the FY25 first half is expected to be between $20 million to $40 million higher compared to the first half of FY24.
Fuel costs in the first half of FY25 are estimated to be approximately $2.7 billion, while net debt is expected to be at or below the middle of its net debt target range.
Its group capacity is expected to rise by 10% in FY25, with group domestic capacity expected to increase by 2%.
With the Qantas share price up 30% in the last six months, I don’t think it’s a cheap buy right now. If earnings can rise in the next few years, particularly thanks to its loyalty division, it could be cheap, but I view Qantas as a cyclical stock, and it’s not currently at the bottom of the cycle, so I wouldn’t invest.
Instead, there are other ASX growth shares I’d suggest have stronger earnings compounding potential.