Why did the Qantas share price rocket 26% in the past quarter?

Investors have been fighting to get hold of the Flying Kangaroo's shares recently.

| More on:
A woman reaches her arms to the sky as a plane flies overhead at sunset.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

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.

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.

Motley Fool contributor James Mickleboro 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 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 Scott Phillips.

More on Travel Shares

Young girl smiles with her hand on top of a suitcase while standing on the tarmac with an aeroplane in the background.
Travel Shares

Will the Qantas share price keep soaring? Here's what experts say

The Qantas share price has well and truly left the tarmac in 2024.

Read more »

A sad woman sits leaning on her suitcase in a deserted airport lounge as the Qantas share price falls
Travel Shares

Qantas share price sinks 5% on huge Qatar Airways-Virgin Australia deal

Qatar Airways is investing in Virgin Australia ahead of the latter's potential return to the ASX boards.

Read more »

A little boy in flying goggles and wings rides high on his mum's back with blue skies above.
Travel Shares

$10,000 invested in Qantas shares one year ago is now worth…

This airline stock has been flying high lately.

Read more »

Man sitting in a plane seat works on his laptop.
Travel Shares

Are Webjet shares a buy following the demerger?

The move created two separate entities.

Read more »

Smiling woman looking through a plane window.
Travel Shares

This insider just spent $500k on Qantas shares

A major investment has been made by a key figure.

Read more »

Couple at an airport waiting for their flight.
Travel Shares

Is the Webjet share price really sinking 12% today?

Today's decline could be very good news for shareholders.

Read more »

Smiling woman looking through a plane window.
Travel Shares

Qantas share price hits 52-week high despite new legal probe

The NZ regulator will shortly file proceedings.

Read more »

A smiling boy holds a toy plane aloft while a girl watches on from a car near an airport runway.
Travel Shares

Can the Qantas share price maintain this lofty altitude?

Qantas share have gained 31% in 2024. Now what?

Read more »