Flight Centre Travel Group Ltd (ASX: FLT) shares are having a volatile start to trade on Wednesday.
The travel agent's shares were down 4% at one stage before rebounding to be 2.5% higher at $12.12.
Image source: Getty Images
Why were Flight Centre shares sinking?
Investors were selling the company's shares after it downgraded its earnings guidance for FY 2026.
According to the release, less than a month since its last trading update, management has revised its underlying profit before tax guidance range to $275 million to $295 million.
This is below its previous guidance range of $310 million to $345 million, with the mid-point of its new range broadly in line with FY 2025's underlying profit before tax of $286 million.
Management stressed that this reflects temporary, conflict-driven headwinds, and is not a deterioration in the underlying business, which grew underlying profit before tax almost 10% over the first three quarters.
It notes that fourth-quarter disruption is expected to reduce leisure earnings by around $50 million, compared to previous expectations, with a further $5 million impact in touring businesses and a $5 million to $10 million foreign exchange impact.
One bright spot is that its global corporate business has been less affected and is on track to deliver strong FY 2026 profit growth.
Looking ahead, management is hopeful that the US-Iran peace deal agreed this week will provide a clearer runway into FY 2027 and a significant earnings tailwind. However, it is unlikely to meaningfully improve the FY 2026 result trajectory given its timing.
However, this guidance downgrade has been overshadowed by news that the company is launching a buyback.
Management commentary and buyback
Commenting on the guidance downgrade, Flight Centre's managing director, Graham Turner, said:
The change in our short-term expectations reflects a temporary, conflict-driven headwind layered over what was shaping as a very solid year. It has been driven by an external shock – the Middle East conflict disrupting peak leisure travel – not by a deterioration in our underlying business.
Group-wide, the company delivered almost 10% UPBT growth across the first three quarters of FY26, accelerating to ~20% growth during Q3. Even after absorbing Q4 disruption, the group still expects an underlying profit broadly in line with FY25.
Turner also revealed that Flight Centre plans to buy back up to $200 million of shares on the belief that they are undervalued. He adds:
Looking ahead, we have strong foundations and growth prospects in both the leisure and corporate sectors. This is reflected in the Board's decision to launch a new up-to-$200m buy-back – which clearly signals that we see our shares as undervalued at current levels.
In leisure, our strategy continues as we work to strengthen Flight Centre brand, expand in growth sectors, including cruise, tour and luxury, and embed the new World360 Rewards program, which now has more than 420,000 members. The $200m profit milestone the business was on track to achieve during FY26 remains a viable, near-term target given that travel downturns are historically short and followed by rapid rebounds
