The S&P/ASX 200 index may have tumbled 3.1% lower last month, but that didn't stop the Qantas Airways Limited (ASX: QAN) share price from storming higher.
The airline operator finished the period with a monthly gain of 5.9%
Why did Qantas' shares outperform in August?
Investors were fighting to get hold of Qantas' shares last month after the release of its full year result.
In FY 2019 the airline posted record revenue of $17,966 million and an underlying profit before tax of $1,302 million. This was a 4.9% increase and 17% decline, respectively, on the prior corresponding period.
Whilst its profit result might not sound like something to get excited about, it is worth how fuel costs and foreign exchange impacted it materially.
According to the release, Qantas' profits were impacted by a $614 million increase in fuel costs from higher oil prices and a further $154 million of foreign exchange impacts on non-fuel net expenditure. If you adjust for this, then Qantas would have delivered strong profit growth in FY 2019.
Which is all the more impressive when you look at their performances of local rivals Air New Zealand Limited (ASX: AIZ) and Virgin Australia Holdings Ltd (ASX: VAH).
Virgin Australia reported an underlying loss before tax of $71.2 million. This was due to the impact of adverse market conditions in the second half of the year and $158.8 million in fuel and currency hedging losses.
And Air New Zealand reported profit before tax of NZ$374 million, down almost 31% on the NZ$540 million profit before tax it achieved in FY 2018.
Another positive for Qantas shareholders was news that its board signed off on an off-market buy-back of up to 79.7 million shares. This buy-back was worth approximately $400 million based on its share price at the time.
Should you invest?
With management positive on its outlook for FY 2020 and its shares trading at an attractive level, I think Qantas would be a good option for investors wanting exposure to the travel sector.
I'm not alone with this view. This morning Goldman Sachs reiterated its conviction buy rating and $6.53 price target on the company's shares.
