Fallen Sharply but Keeping Long Term Outlook Intact
This ASX 200 stock has tumbled since the war started and is now trading at lower valuation levels compared to its historical average and investors should keep a close watch on it.
Qantas Airways Limited (ASX: QAN)
Qantas Airways Limited (ASX: QAN) has declined 17.5% in the past one month mainly due to the war and rising fuel prices because fuel costs form a large part of airline operating expenses while current market capitalisation is $12.95 billion.
The company in 1H26 reported underlying profit before tax of $1,456 million, statutory profit after tax of $925 million and operating cash flow of $1.8 billion which shows stable performance compared to the previous corresponding period.
Important metrics include underlying EPS of 68 cents and operating margin of 12.3% and net debt of $5.6 billion which is within the company target range for FY26.
The company also returned $400 million to shareholders through fully franked dividends and buybacks and the current annual yield is 5.4% although the company has not been very consistent with dividends in the past.
Recent developments include major fleet renewal with new aircraft deliveries and expansion of international routes and digital transformation initiatives along with investment in technology and customer experience.
The Qantas loyalty segment continues to perform well because members and points earned are growing which provides a high margin recurring revenue stream for the company.
The company is also investing heavily in fuel efficient aircraft which should reduce fuel costs and improve margins over time.
Management stated that the company is entering a new era with focus on customers and operational efficiency and fleet renewal which should support long-term earnings growth.
The domestic business continues to deliver strong margins while the international segment is improving because of network expansion and fleet upgrades.
Passenger numbers and revenue per seat and capacity all increased compared to last year which indicates steady demand recovery.
The company is also investing in AI and automation and digital platforms to improve pricing and customer service and operational efficiency.
At a Price/Earnings ratio of 8.1, the stock is trading at a relatively low valuation compared to historical levels.
There are short term risks like high fuel prices and economic slowdown but the long-term outlook depends on travel demand, cost control and fleet efficiency improvements.
(Source: Company Announcements)
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