Why are Qantas shares beating the ASX 200 this month?

Qantas Airways Ltd (ASX: QAN) shares have outperformed the broader market in recent weeks after a string of recent updates.

Shares in the airline have gained nearly 3% over the past 30 days, compared to the benchmark S&P/ASX 200 Index (ASX: XJO), which is up just 1.8%.

Here's why investors are lifting the Qantas share price to its current levels.

Qantas shares outperform

Qantas' FY24 financial results in August drove the initial buying thrust in the airline's shares. First was the company's growth, with reported revenues up by 10% to nearly $22 billion.

But another likely factor is the cash Qantas seeks to return to its shareholders over the coming years.

Management said it could buy back up to $400 million of the company's stock, which is more than 3% of Qantas' market capitalisation at the time of writing.

The frosting on top was the hint that management might even consider starting to pay dividends again by H2 FY25. I'm keeping my fingers crossed.

This kind of capital return has likely helped lift demand for Qantas shares in recent weeks.

But Qantas' long-held position as Australia's leading long-haul international airline carrier is facing fresh challenges.

Qatar Airways and Virgin Australia recently inked a deal that sees Qatar take a 25% equity stake in Virgin. This move could stiffen competition on long-haul international routes.

Lower ticket prices and stronger competition could impact the profit pool for everyone moving forward, but we shall see.

It is interesting that investors seem to have broadly looked beyond a Federal Court ruling last week slapping the airline with a $100 million penalty for selling tickets it had already cancelled during COVID-19.

The Australian Competition and Consumer Commission (ACCC) started court proceedings against Qantas in August last year.

Qantas admitted its wrongdoings in the matter back in May.

What do brokers say?

While the Virgin-Qtatar deal initially grabbed a few headlines, the overall position on Qantas shares from analysts looks to have remained unchanged.

Analysts at UBS have been bullish on Qantas, maintaining a buy rating with a price target of $7.50 in early October.

It says that FY25 is "the new normal" for Qantas after the pandemic era, with "strong valuation support" behind the airline, according to my colleague Tristan.

Meanwhile, Goldman Sachs also has a buy rating on Qantas shares with a higher price target of $8.05, despite recently removing the stock from its APAC Conviction List.

Foolish takeaway

Qantas shares have outperformed the broader market this past month as investors look to what the airline has in store for the future.

In the past twelve months, Qantas shares have lifted 41%.

The post Why are Qantas shares beating the ASX 200 this month? appeared first on The Motley Fool Australia.

Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs Group. 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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