Flight Centre Travel Group Ltd (ASX: FLT) shares are taking a hit on Wednesday after the travel company released its FY26 results.
At the time of writing, the Flight Centre share price is down 6.79% to $12.08.
The reaction is probably not what shareholders were hoping for, especially with a few solid numbers in the result.
But once you dig a little deeper, there are also some weaker spots that help explain why the market has reacted this way.
Let's take a closer look at the numbers.
Image source: Getty Images
FY26 results were mixed
Flight Centre reported record total transaction value (TTV) of $25.7 billion, up 4.7% from FY25, while revenue increased 2.5% to $2.9 billion.
Underlying EBITDA also moved higher, rising 3.9% to $466 million. However, underlying profit before tax went the other way, falling 4% to $278 million.
Statutory net profit after tax (NPAT) increased 38% to $149 million, while earnings per share (EPS) jumped 43% to 70.9 cents.
Shareholders also received some good news on the dividend front, with Flight Centre declaring a fully franked final dividend of 30 cents per share. This takes the full-year payout to 42 cents, up 5% on FY25.
The company said trading was strong through the first 9 months before conflict in the Middle East disrupted travel during the fourth quarter.
Flight Centre estimates the disruption cost its leisure business around $60 million in profit.
Why are Flight Centre shares falling?
The weaker result from Flight Centre's leisure business looks to be one of the biggest reasons investors are selling the shares today.
Barrenjoey analyst Matt Ryan said underlying profit before tax came in around 2% below market expectations, while the leisure division missed consensus by about 8%.
There was still growth in travel volumes, with leisure TTV rising 7.4% to $12.6 billion. But that didn't flow through to earnings, with underlying EBITDA falling 6.7% to $250 million and underlying profit before tax dropping 21.7% to $139 million.
The corporate business had a stronger year, with underlying profit before tax rising 28% to $240 million.
Furthermore, there's also a few reasons for investors to be cautious heading into FY27.
Flight Centre expects corporate earnings to be more heavily weighted toward the second-half, with first-half profit likely to come in below last year.
Flight Centre pointed to the Middle East war, upfront investment, currency movements and contract timing as reasons for the softer start.
What happens next?
Despite the subdued mood, there are still a few positive signs heading into FY27.
Flight Centre said July delivered record TTV and its strongest July leisure profit since 2015.
Long-haul travel from Australia is also starting to improve, which could help the business over the year ahead.
RBC Capital Markets highlighted the strong July performance, although there's still some uncertainty around how quickly earnings can recover.
Investors should get a better idea in November, when Flight Centre plans to provide its FY27 earnings guidance at its AGM.
