Flight Centre share price tumbles despite losses narrowing

Outwardly strong earnings weren't enough to impress this top broker.

Key points
  • The Flight Centre share price is falling 3% right now to trade at $18.04
  • It comes as the travel giant posts its earnings for the first half of financial year 2023
  • Goldman Sachs remains unimpressed despite the company's underlying pre-tax losses narrowing to $2.4 million

The Flight Centre Travel Group Limited (ASX: FLT) share price is in the red on Wednesday amid the company posting an underlying pre-tax loss of $2.4 million for the first half, as The Motley Fool Australia reported earlier.

That's a major improvement on the $188 million loss it posted for the same period of last financial year.

Though, brokers were disappointed by its performance in the Americas.

The Flight Centre share price is $18.04 right now, 3.01% lower than its previous close.

Let's take a look at what might be going so wrong for the S&P/ASX 200 Index (ASX: XJO) travel giant.

a small boy sits alone with his brightly coloured suitcase next to him in a deserted airport while he rests a hand against his head and looks down into his lap as though he is weary.

Image source: Getty Images

Flight Centre share price falls as broker responds to earnings

Flight Centre is "lying foundations for more meaningful profit recovery", CEO Graham Turner says, but it seems that's not enough to boost its share price today.

It's falling as the company's operating cash flow and performance in the Americas disappoints broker Goldman Sachs.

The Americas region brought in $2.11 billion of total transaction value (TTV) for the company. That's up 149% year-on-year but 14.9% lower than the broker's forecasts.

That was offset by Australia and New Zealand's $5.22 billion of TTV – a 290% jump and 17.2% more than Goldman Sachs tipped.

The group's $9.9 billion of TTV and $1 billion of revenue beat expectations by 2.5% and 3.2% respectively. Though, its operating cash flow disappointed in a major way. It came in at a $91.8 million loss, compared to a forecasted $8.9 million positive result.

Ultimately, the results failed to convince the broker. Goldman Sachs remains neutral on Flight Centre's shares, slapping them with a $16.40 price target – a potential 9% downside.

At the same time, Morgans was expecting the company to post around $80 million of corporate earnings before interest, tax, depreciation, and amortisation (EBITDA), my Fool colleague James reported last week. It also might've had its eye out for a guidance upgrade.

Neither of these outcomes occurred today. Flight Centre's corporate EBITDA was $72 million and its underlying EBITDA guidance remained at $250 million to $280 million.

Looking forward, Turner said the company hasn't noticed any downturn amid rising cost of living pressures, saying customers view travel as essential.

The ASX 200 travel giant also declined to offer a dividend for this half. Though, it's started a review of its capital structures ahead of an expected uptick in earnings and cash.

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs Group. The Motley Fool Australia has recommended Flight Centre Travel Group. 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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