The Flight Centre Travel Group Ltd (ASX: FLT) share price has done incredibly well in 2023 to date, rising by over 40% in 2023, as we can see in the chart below.
The ASX travel share has been benefiting from a resurgence in travel demand. It's possible that the outlook for travel could drive the Flight Centre share price even higher.
What's the latest outlook commentary?
At the recent Macquarie Group Ltd (ASX: MQG) investment conference, Flight Centre said that it was doing well and removed the low end of its guidance range for FY23.
It's targeting underlying earnings before interest, tax, depreciation and amortisation (EBITDA) of between $270 million to $290 million.
The travel demand is "holding up strongly", with a post-COVID record for total transaction value (TTV) in March 2023, which was 6% above the March 2019 result. It experienced over $1 billion of TTV in both the leisure and corporate businesses for the first time ever in a month.
Not only are things going well on the demand side, but the company also pointed out that its underlying cost margin is now at a "historic low" which "reflects permanent and structural cost base changes early in [the] pandemic and growth in lower cost, highly scalable models".
It did acknowledge that its revenue margin is being impacted by rapid growth in the lower revenue margin businesses. This impact is expected to be offset by "cost margin reductions and other margin improvement strategies."
Talking about the pipeline, with the corporate business it said the pipeline is "strong" for future TTV as new and recent wins are boarded and starting to trade. The operating cost leverage is "starting to be seen and will increase" over the FY23 fourth quarter and FY24 first half.
In the leisure segment, it said that it exceeded pre-COVID TTV levels in Australia in March 2023.
Flight Centre shares could also be benefiting from a strengthening balance sheet. In the third quarter of FY23, it saw a $200 million increase in cash and investments. It also said that a 'capital management review' is underway.
In FY25, it's targeting a total underlying profit before tax (PBT) margin of 2% through a combination of revenue margin and cost margin improvement. It noted that it doesn't intend to "sacrifice future prosperity by slowing growth in profitable but lower margin businesses in order to hit [the] short-term margin target".
Is the Flight Centre share price a buy?
According to Commsec, Flight Centre shares are valued at 21 times FY24's estimated earnings and 16 times FY25's estimated earnings.
Of the analyst ratings that Commsec covers, eight rate it as a buy, four rate it as a hold, and two rate it as a sell. Analysts are positive on the business.
No one can truly say how much further the Flight Centre share price can run. However, I'd suggest that it's a lot closer to its 2023 peak than at the start of the year considering it has already gone up so much.
I'm not jumping to buy Flight Centre shares today, but I think its financials will show a good improvement over the next year or so. Though the market is already seemingly expecting this.
