Why Qantas Airways Limited shares are taking off today

In morning trade the Qantas Airways Limited (ASX: QAN) share price has taken off following the release of its third-quarter update.

At the time of writing the airline’s shares are up 4% to $6.03.

What was in the update?

Qantas has had a strong third-quarter and reported quarterly revenue of $4,250 million, up a solid 7.5% on the prior corresponding period.

This strong performance builds on the record first-half result announced in February and was underpinned by positive market conditions, the timing of Easter, capacity discipline, and the airline’s ongoing transformation.

This ultimately led to group unit revenue (RASK) increasing by 6% compared to the prior corresponding period.

Qantas CEO Alan Joyce believes the result demonstrates the company’s ability to achieve profit growth despite rising fuel costs.

He stated that: “Qantas is on track to deliver another record full year result even though we’re facing a $200 million increase in our total fuel bill in FY18. We’re seeing solid results from each of our business units, which is a reflection of broadly positive trading conditions and the work we’ve done to strengthen the Group.”

As a result of this strong quarter, management expects a record underlying profit before tax of between $1,550 million and $1,600 million.

This will be an increase of between 10.7% and 14.3% year-on-year and could mean that Qantas is on course to beat the market’s expectations.

According to a note out of Goldman Sachs, the market consensus estimate was for profit before tax of $1,550 million in FY 2018. It comes, therefore, as no surprise to see the airline’s shares push higher today.

Should you invest?

I think Qantas is a fantastic company led by one of the best CEOs in Australia and a great option for investors today.

The fact that the company is on course to deliver a record profit result despite rising fuel costs gives me a lot of confidence in its future performance.

In light of this, I would suggest investors choose Qantas ahead of industry peers Air New Zealand Limited (ASX: AIZ) and Virgin Australia Holdings Ltd (ASX: VAH).

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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