While Aurizon Holdings's earnings (EBIT) declined -11% on pcp, they were 3% better than Morgans had expected. The key driver was the growth in Bulk and decline in overheads, while lower volumes affected Coal and Network.
In terms of the broker's valuation, it's considered the disconnect with the share price can be partly explained by the anticoal thematic as well as negative sentiment arising from the China coal import restrictions.
The company says it has around $900m of excess capital that it can deploy. While the analyst assumes this continues to be used for share buybacks, investment opportunities seem to be increasing.
The Add rating is unchanged and the target price is decreased to $4.56 from $4.76.
Target price is $4.56.Current Price is $4.00. Difference: $0.56 - (brackets indicate current price is over target). If AZJ meets the Morgans target it will return approximately 12% (excluding dividends, fees and charges - negative figures indicate an expected loss).
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