What Should We Expect From Qantas Airways Limited’s (ASX:QAN) Earnings In The Next 12 Months?

In December 2018, Qantas Airways Limited (ASX:QAN) announced its earnings update. Overall, analysts seem cautiously bearish, as a 13% rise in profits is expected in the upcoming year, relative to the higher past 5-year average growth rate of 54%. Currently with trailing-twelve-month earnings of AU$980m, we can expect this to reach AU$1.1b by 2020. In this article, I’ve outline a few earnings growth rates to give you a sense of the market sentiment for Qantas Airways in the longer term. Readers that are interested in understanding the company beyond these figures should research its fundamentals here.

View our latest analysis for Qantas Airways

How is Qantas Airways going to perform in the near future?

The 10 analysts covering QAN view its longer term outlook with a negative sentiment. Given that it becomes hard to forecast far into the future, broker analysts tend to project ahead roughly three years. To get an idea of the overall earnings growth trend for QAN, I’ve plotted out each year’s earnings expectations and inserted a line of best fit to determine an annual rate of growth from the slope of this line.

ASX:QAN Past and Future Earnings, April 8th 2019
ASX:QAN Past and Future Earnings, April 8th 2019

By 2022, QAN’s earnings should reach AU$983m, from current levels of AU$980m, resulting in an annual growth rate of -3.8%. However, if we exclude extraordinary items from earnings, we see that the profits is predicted to rise over time, resulting in an EPS of A$0.66 in the final year of forecast compared to the current A$0.56 EPS today. The main reason for QAN’s earnings contraction is cost outpacing top line growth of 2.4% over the next few years. Furthermore, the current 5.7% margin is expected to contract to 5.3% by the end of 2022.

Next Steps:

Future outlook is only one aspect when you’re building an investment case for a stock. For Qantas Airways, there are three fundamental aspects you should look at:

  1. Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
  2. Valuation: What is Qantas Airways worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether Qantas Airways is currently mispriced by the market.
  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Qantas Airways? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.