The Qantas Airways Limited (ASX: QAN) share price has been one of the best performers on the Australian share market in recent months.
In fact, during the third quarter of 2024, the airline operator's shares ascended an impressive 26%.
As a comparison, the S&P/ASX 200 Index (ASX: XJO) rose 6.5% over the same period. That's an outperformance of almost 20% for the Flying Kangaroo's lucky shareholders.
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Why is the Qantas share price outperforming?
Investors have been bidding the company's shares higher since the release of its full year results at the end of August.
For the 12 months ended 30 June, Qantas reported a 10.7% increase in revenue to $21.9 billion and a 16% decline in underlying profit before tax to $2.08 billion. The latter was in line with the analyst consensus estimate for FY 2024.
Key drivers of airline's strong result were the Jetstar Group and Qantas Loyalty businesses. Jetstar Group delivered a 23% increase in underlying EBIT to $497 million and Qantas Loyalty posted a 13% lift in underlying EBIT to $511 million. This was offset by profit declines from the Qantas Domestic and Qantas International businesses.
Also getting investors excited was management revealing that dividends could return soon. The company advised that it is "anticipating fully franked base dividends to be reinstated from 2H25, subject to Board approval."
But that doesn't mean there weren't any shareholder returns with its latest results. The company announced a $400 million on-market share buy-back.
Is it too late to invest?
Although Qantas' shares have been on fire recently, the team at Goldman Sachs believes they can keep rising from where they currently trade.
According to a recent note, the broker has put a buy rating and $8.05 price target on its shares. Based on the current Qantas share price of $7.17, this implies potential upside of 12.2% for investors over the next 12 months.
In response to its results in August, the broker said:
Qantas Airways is the flagship carrier of Australia and is the largest airline in Australia by capacity share, serving destinations domestically and internationally.
As a key beneficiary of the re-opening of the world post-COVID, we expect the airline's traffic capacity to return to 102% of pre-COVID levels by FY25e, with the airline's earnings capacity (EPS) expected to exceed that of pre-COVID levels by ~74%.
We forecast a ~22% FY19-24e cumulative uplift in unit revenues (c. 4.0%pa), and ~50% drop-through of QAN's A$1bn+ structural cost-out program. QAN's current market capitalisation is in-line and enterprise value is still 3% below pre-COVID levels.
As such, we believe QAN is not priced for a generic recovery, let alone prospects for improved earnings capacity. We continue to see upside associated with substantially improved MT earnings capacity.
