Australian Investment Blog

23/08/2018

QANTAS (QAN) – Fuel costs start to bite

Stock

QANTAS (ASX:QAN) as at 23/08/2018

Event

A volatile day for QAN after they released full year earnings this morning – the stock trading in a ~10% range. An early sell off but some strong buying into the weakness as CEO Alan Joyce allayed concerns around higher fuel costs, saying they should be able to “more than cover” higher fuel costs in the domestic market! He didn’t match that pledge for the more competitive international market, saying only that Qantas will “substantially recover” the higher cost of jet fuel on those routes.

In terms of earnings, it was a record full year profit for QAN at $1.13b which was broadly inline with market expectations while the dividend was stronger than expected. Clearly this is a good result for QAN however the stock has run hard into it, plus they’ve now got the added headwind of higher fuel costs. To give some context here, QAN will spend around $3.92bn on fuel in FY19, which is up by about A$690 million on FY18. QANTAS (QAN) Chart

Market Matters Take/Outlook

QAN was a fat operation with a lot of low hanging fruit in terms of costs, which have now largely been trimmed. This coincided with a low fuel price affording QAN a strong tailwind over the past 12 months. While the stock remains cheap, its gets harder from here for the flying kangaroo.

Subscribe to Market Matters Blog

Latest Reports

Weekend report 26/07/2025

CORRECTWeekend Q&A: The ASX200 is feeling “soft” as we approach August & September

The ASX200 slipped 1% last week, eroding 40% of July's gains as the RBA took the shine off the local market even as global indices pushed to fresh highs, i.e. the US S&P 500 advanced +1.5% last week. The S&P 500 notched its 5th straight record weekly closing high, courtesy of more than 80% of the 169 S&P 500 companies that have reported to date have beaten Wall Street’s expectations. In Australia, it's been a more mixed and polarised affair on the reporting front, but with the “Big Four Banks” retreating on average close to 4% the ASX was always going to struggle to match its overseas peers.

Afternoon report 25/07/2025

The Match Out: Stocks end the week lower; Resources join Banks in the sell-off

The ASX put in a weaker session seeing sustained selling through the day, as softer iron ore prices weighed on the materials space. With heavyweight resources and the big banks down, the index was fighting a losing battle from start to finish, though we still managed to close higher for the week.