Qantas still a buy, say brokers after sharp sell-off as Jetstar rules the skies

Qantas (ASX: QAN) delivered a solid first-half result, but the market wasn’t impressed — with the stock falling sharply on Thursday despite steady earnings and an uplift in capital returns.

The reaction appears less about what Qantas reported, and more about what investors were hoping for. With expectations elevated and the stock already pricing in a strong outlook, even a “good” result may not have been enough — particularly with pressure emerging in International and costs creeping higher.

The big brokers’ verdicts are now in — and while there are differences in emphasis, the consensus is that the sell-off may say more about expectations than fundamentals.

Key data and company outlook commentary

Reported metrics:

• Domestic revenue: $4.21 billion, ahead of estimates (+5% y/y)

• International revenue: $4.85 billion, broadly in line with estimates (+4.9% y/y)

• Jetstar revenue: $3.12 billion, ahead of estimates (+7.9% y/y)

• Loyalty revenue: $1.40 billion, slightly below estimates (+4.9% y/y)

• Domestic EBIT: $676 million, ahead of estimates (+4.5% y/y)

• International EBIT: $300 million, below estimates (down 8.3% y/y)

• Jetstar EBIT: $492 million, ahead of estimates (+12.1% y/y)

• Loyalty EBIT: $286 million, broadly in line with estimates (+12.2% y/y)

• Free cash flow: ($57 million) (vs $677 million prior period)

• Capex: $1.81 billion

• Dividend: 19.8 cents per share, below estimates (vs 21.7 cents per share)

Guidance:

• Capacity growth: ~4%, with International capacity rising ~8% (ex-Jetstar Asia closure)

• RASK: +3% Domestic, +1–3% International

• Loyalty EBIT growth: +10–12%

Broader outlook:

• Cost pressures flagged, including labour, new aircraft entry costs and inflation

• Transformation benefits expected to be second-half weighted

• International remains the key swing factor, with softer transpacific demand and capacity redeployment into Asia underway

Expert views

UBS

Rating: Buy | Price Target: $11.60 (from $11.50)

View: UBS views the result as broadly in line at the profit line, with capital management the key positive surprise, including a higher base dividend and buyback. The broker argues the sell-off is disconnected from fundamentals, stating the “~9% share price move was an over-reaction and makes the upside even more compelling.” UBS attributes the weakness to elevated expectations and renewed scrutiny on Qantas International ahead of capacity growth and Project Sunrise.

Macquarie

Rating: Outperform | Price Target: $12.00 (from $12.20)

View: Macquarie describes a “good” result, underpinned by strength in Domestic and Jetstar, where yields exceeded expectations and fleet upgrades are supporting margins. Its key concern remains International, noting “overcapacity in the US has resulted in load factor declines,” with recovery likely to take time. While this caps near-term upside, Macquarie sees the group’s core earnings drivers — particularly Domestic and Jetstar — as sufficient to support the medium-term outlook.

Jarden

Rating: Buy | Price Target: $12.70 (unchanged)

View: Jarden highlights a broadly steady result, with earnings largely meeting expectations and supported by resilient Domestic and Loyalty performance. The broker sees International weakness as cyclical and believes the strength of the domestic franchise is underappreciated, while the buyback signals confidence in valuation. It also points to Project Sunrise as a longer-term earnings lever, reinforcing a constructive medium-term outlook.

Jefferies

Rating: Buy | Price Target: $13.43 (from $13.27)

View: Jefferies focuses on the strength in Jetstar, noting fleet-driven efficiencies are supporting margins and reinforcing the benefits of Qantas’ integrated model. The broker views the market reaction as unjustified, arguing that softer International conditions do not derail the broader investment thesis, with medium-term growth supported by network optimisation and ongoing fleet renewal.

E&P

Rating: Positive | Price Target: $12.02 (from $12.26)

View: E&P acknowledges near-term cost pressures but expects these to unwind, with fleet renewal and operational improvements supporting margin expansion over time. The broker highlights balance sheet strength and capacity for further capital returns, viewing the share price weakness as overdone. It sees earnings momentum improving into the second half as cost headwinds ease and efficiency benefits scale across the group.

Broker consensus

Qantas Airways Broker Consensus

To obtain a stock’s Broker Consensus Rating, we assign a value of +1 to any rating better than HOLD/NEUTRAL/MARKETWEIGHT, a value of 0 for any rating equivalent to HOLD/NEUTRAL/MARKETWEIGHT, and a value of -1 to any rating worse than HOLD/NEUTRAL/MARKETWEIGHT.

We then take the average of all assigned rating values and assign a Broker Consensus Rating of BUY to values greater than +0.5, a rating of HOLD for values between -0.5 and +0.5, and a rating of SELL for values less than -0.5.

The Broker Consensus Target is simply the average of the target prices we have on file for each broker. Typically, brokers define their target prices as a 12-month forecast. Each target price is based on fundamental valuation assumptions.

QAN’s broker consensus rating is +0.9, resulting in a Broker Consensus Rating of BUY (unchanged post results). Its Broker Consensus Target is $12.24 (down from $12.32 prior to results). This suggests brokers collectively believe the stock is around 26.5% undervalued based upon the closing price on Thursday 26 February of $9.67.

Note these values may change as other brokers in our database update their QAN ratings and price targets.