What to expect from the Qantas (ASX:QAN) first half result

Is the Qantas Airways Limited (ASX:QAN) share price in the buy zone ahead of its half year results release?

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nose of Qantas plane WUNALA

Image Source: Qantas

With earnings season now underway, I have been looking at what is expected from some of Australia’s most popular companies.

On this occasion, I’m going to take a look at airline operator Qantas Airways Limited (ASX: QAN).

What is the market expecting from the Qantas half year result?

Unsurprisingly, given the impact that COVID-19 is having on the travel industry, the market is expecting Qantas to report a significant loss for the first half of FY 2021.

According to a note out of Goldman Sachs, its analysts are forecasting an operating loss of $65 million for the half. This is down from an operating profit of $1,896 million a year earlier.

On the bottom line, the broker is forecasting a loss before tax of $1,171 million. This is a touch larger than the market consensus estimate for a loss before tax of $1,103 million.

And as you might expect given the circumstances, no interim dividend is forecast to be declared.

What else should you look out for?

Given that the loss is inevitable and largely factored in, investors may be wondering what else to pay attention to. Well, the good news is there’s plenty to stay tuned for according to Goldman Sachs.

Firstly, it has suggested investors look out for an update on recent travel restrictions.

It commented: “The key focus of investors will be the impact of the recent domestic border restrictions on movements from Victoria and NSW. How has the airline adjusted scheduled domestic services, and what is the outlook for re-opening?”

It is also hoping management will provide clarity of its financial performance.

Goldman explained: “QAN indicted that its capacity had returned to 68% of pre-covid levels in December. How did the airline perform, including passenger volumes, load factors, yields and ultimately operating margins?”

In addition to this, the broker is keen to hear about the outlook for the Loyalty business and the company’s liquidity and balance sheet.

In respect to the latter, Goldman said: “In December QAN indicated that it had A$3.6bn in available liquidity. With the recovery in passenger activity what was the draw down on customer credits (A$3.2bn as at 30 June) and loyalty points (A$2.5bn), and how much of this has been recovered through recent sales?”

“QAN indicated that the balance sheet repair process would begin in 2H21. Is this still likely in the face of recent border closures? With mobility again restricted, what is QAN’s outlook for cash burn rates in the second half (2H21)?” it added.

Is the Qantas share price good value?

Goldman Sachs believes the Qantas share price is great value at present and that investors should look beyond the short term pain for potential long term gains.

It has just retained its buy rating and $7.05 price target. This compares very favourably to the current Qantas share price of $4.72.

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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. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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