Qantas Airways Ltd (ASX: QAN) shares have been an unstoppable force over the past 12 months.
During this time, the airline operator's shares have almost doubled in value.
Investors have been scrambling to get hold of the Flying Kangaroo's shares after strong results underpinned a major re-rating.
But despite its heroics, the team at Goldman Sachs doesn't believe it is too late to invest.
In fact, the broker has just urged investors to snap up shares for potential market-beating returns over the next 12 months.
Is now the perfect time to buy Qantas shares?
While the perfect time to have bought shares would have been a year ago when I tipped Qantas as a buy, now could be almost as good according to the broker.
According to a note out of the investment bank, its analysts have retained their buy rating on the company's shares with an improved price target of $11.80.
Based on the current Qantas share price of $9.99, this implies potential upside of 18% for investors between now and this time next year.
In addition, Goldman is forecasting a 43 cents per share dividend in FY 2025. This represents a 4.3% dividend yield and boosts the total potential return beyond 22%.
What is the broker saying?
Goldman highlights that Qantas' earnings have been reset to sustainably higher levels following the hard work it put in during the COVID-19 pandemic. It explains:
QAN's earnings capacity has sustainably improved relative to pre-COVID, which provides a solid foundation for QAN's next stage of growth. Specifically, 1H25a PBT was 79% ahead of 1H19a. Capacity was largely restored with RASK up broadly in-line with inflation (albeit with a substantially higher fuel price). From here, unit revenues appear set to inflect higher in the 2H (RASK guide was the key positive surprise within 2H25e guidance). We forecast 20% PBT growth in 2H25e and 15% for FY25e (up from our pre-result forecasts of 7% and 10% respectively).
The broker also highlights the company's fleet renewal program as a reason to be positive. It adds:
The 1H25 result and guidance for the full year also reflect upside associated with initial deliveries from QAN's fleet renewal program. In 1H25, QAN took delivery of 11 aircraft. Within this Jetstar took delivery of 8 new aircraft – with the renewal upside (& robust demand) evident in segment margins. As the renewal program gains momentum across the group/, we see upside from yield mix, load factor, capacity and cost efficiencies, driving the next leg of growth.
There is clearly capex attached to renewal (GSe A$12.5bn of total capex across FY25-27 vs A$12bn prior), of which A$6.5bn is on new aircraft. However, our modeling of the operational benefits (incorporated with this note) provides us with confidence that QAN should continue to track the bottom of its target leverage range and therefore generate surplus capital to return to shareholders.
All in all, now could be a good time to pick up Qantas shares according to the broker.
