Flight Centre Travel Group Ltd (ASX: FLT) shares were drifting lower on Wednesday after the company delivered a solid profit result, but brokers agree that the company's shares are good buying at these levels.
The travel company said in a statement to the ASX that it had delivered an underlying profit before tax of $125 million, "above expectations", on revenue of $1.411 billion, up 6%.
Flight Centre said the expectation had been for a "broadly flat" profit, and it had surpassed this "comfortably''.
The company's total transaction value hit a record of $12.5 billion, up 7%, and the company had a record low cost margin of 9.6%, "reflecting disciplined cost management and productivity gains''.
Managing Director Graham Turner said it was a solid result.
Our results reflect our global model's strength and our brands' enduring value as we continue to evolve. Despite challenging conditions, demand remains resilient and we're using our scale, people and technology to capture a growing market. "We are expanding into new sectors and creating additional revenue streams beyond traditional corporate travel management and leisure retailing. These initiatives are ensuring we are future-fit, deepening customer relationships and strengthening our market position.
Image source: Getty Images
AI to be a differentiator
The company also said it was investing in artificial intelligence and "deepening its competitive moat by leveraging its loyal customer base and proprietary data to build differentiated, AI-powered capabilities that competitors cannot replicate''.
The company added:
Supported by strong brand trust, exclusive product offerings and expert consultant capability, the company sees ongoing growth opportunities in complex, high-value travel segments as it scales an enterprise-wide AI strategy designed to lift productivity, enhance personalisation and strengthen long-term competitive advantage.
Flight Centre declared a fully-franked interim dividend of 12 cents per share, up 9% on the previous corresponding period.
On the outlook, the company said it had started the year "solidly" and reaffirmed its previous guidance of $315 to $350 million in underlying profit before tax, which would be a 15% increase on FY25 if the midpoint were achieved.
Despite the upbeat outlook, Flight Centre shares were 1% lower at $13.15 in early trade.
Flight Centre shares looking cheap
The team at UBS said in a note to clients that the pre-tax profit results beat consensus expectations by 5% and "productivity improvements appear to be delivering in corporate''.
They also said there had been a large turnaround in the leisure division and the Asian business had swung to a profit.
UBS has a price target of $16.45 on Flight Centre shares.
Jarden is even more bullish on the company, with an $18.50 price target on Flight Centre shares.
The Jarden team said the risks were now "weighted to the upside" and noted that the company's buyback was continuing, which would also bolster the share price.
RBC Capital Markets has a $16 price target on Flight Centre shares.
The RBC team said the corporate profitability looked "very strong".
They added:
We already expected a strong focus on the corporate segment given industry disruption in this sector, but the standout profitability may draw even more attention.
