HOLD Flight Centre
The Intelligent Investor, James Greenhalgh
After a shocker of a first half, who would have thought Flight Centre could hit management’s aggressive earnings guidance? Well, it just did.
Flight Centre is one of the world’s largest travel retailers, has a rapidly growing corporate travel business and is branching out into “in-destination travel experiences” such as tours and even hotel management. Airfare deflation in the first half moderated in the second, while the company has engaged in some self-help by effectively managing costs and improving staff productivity. As a result, it recently announced that it would earn around $2.25 a share in 2017, close to the top end of management’s guidance.
The management remains first-rate and continues to run the company with the next two decades in mind rather than the next two years, some- thing that we approve of. It is also remains well placed to deal with online competition. Unfortunately, the recent good news means the company is too expensive for us to consider upgrading to buy.