Why did the Qantas share price take off in November?

The Qantas Airways Limited (ASX: QAN) share price is on course to record a strong monthly gain.

In morning trade, the airline operator’s shares are down slightly to $6.19.

This means the Qantas share price is up 6% since the start of the month.

Why did the Qantas share price take off in November?

Interestingly, the Qantas share price was looking like it could have an underwhelming month as recently as two weeks ago.

At that point, the flying kangaroo’s shares were trading modestly lower month to date.

But that all changed just a few days later when the release of a trading update turned on the afterburners and sent Qantas’ shares hurtling higher.

What was in the trading update?

Readers may recall that in October, Qantas provided the market with its first half profit guidance and net debt guidance.

It advised that it expected to report an underlying profit before tax of between $1.2 billion and $1.3 billion for the six months ending 31 December. Management also revealed that it expected its net debt to be between $3.2 billion and $3.4 billion, well below of its target of $3.9 billion.

Well, fast forward a little over a month and Qantas is now expecting to be even more profitable. Such a refreshing change after a couple of years of COVID struggles!

According to the release, management expects the airline to post an underlying profit before tax of between $1.35 billion and $1.45 billion for the half. This represents a $150 million increase to the guidance range given in October.

Qantas advised that this is being driven by consumers continuing to put a high priority on travel ahead of other spending categories. In addition, it advised that there are signs that limits on international capacity are driving more domestic leisure demand, which is benefiting Australian tourism.

Impressively, this strong profit is being achieved despite Qantas’ fuel costs being on course to reach a record high of $5 billion for FY 2023.

In light of this strong performance and also due to some delayed capital expenditure, Qantas expects its net debt to be $2.3 billion to $2.5 billion at the end of December. This is around $900 million better than expected in its most recent update.

Anything else?

Also giving the Qantas share price a boost was the reaction from brokers.

A number of Australia’s leading brokers, such as Goldman Sachs, responded by reiterating their buy ratings and lifting their price targets.

In fact, Goldman is tipping the Qantas share price to reach a record high of $8.20. This bodes well for its shares in December and beyond.

The post Why did the Qantas share price take off in November? appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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