SYDNEY: The last remaining bearish analyst covering Qantas Airways Ltd is defying the stock’s record rally, warning that the airline may yet be undone by a A$20bil (US$13bil) bill to replace its ageing fleet.
Morningstar’s Angus Hewitt has the only “sell” rating on Qantas among 16 analysts tracked by Bloomberg.
He’s watched on this year as shares in the Australian airline blasted through the target prices of his bullish rivals.
The stock’s 65% surge in the 12 months through last week makes Qantas the fourth-best performer on the Bloomberg World Airlines index.
Qantas is trading at near-record highs after chief executive officer Vanessa Hudson healed its post-Covid reputational wounds and turned relentless air-travel demand into super-sized profits.
Less than two years into her tenure, Hudson is squeezing so much cash from the airline it’s paying out the fattest dividend in almost two decades.
Hewitt is unmoved. One of the biggest risks for Qantas, he argued, is exactly where Hudson sees some of the biggest opportunities: The largest fleet overhaul in the airline’s 105-year history.
Qantas has firm orders for almost 200 new aircraft. They include short-haul Airbus SE jets to replace workhorse Boeing Co 737s, and long-haul Airbus planes to start unprecedented direct flights connecting Sydney with London and New York.
Hudson said the new, fuel-efficient jets will deliver earnings growth.
Hewitt instead highlights the costs. He expects more than A$20bil in capital expenditure (capex) at Qantas over the next five years.
That’s more than double all the profit he forecasts for the airline in the same period.
The outlay is also more than the airline’s current A$15.5bil market value.
That’s “a massive capex bill” and a “medium-term headwind,” Hewitt said in an email.
In response, Qantas referred to comments made by Hudson at an investment conference this year, when she spoke of a “huge benefit case behind the new aircraft.” — Bloomberg
