Aurizon Holdings (AZJ) – Earnings railroaded

Aurizon Holdings is a rail freight and logistics operator in Australia hauling mining, agricultural, industrial, and retail products. The company also operates and manages the Central Queensland Coal Network that consists of 2,670 kilometres of track. The company was incorporated in 2010 and is headquartered in Fortitude Valley in Brisbane.

‍

Aurizon Holdings warned that FY25 operating earnings would fall short of previous guidance, mainly due to an increase in bad debt provisions in its bulk operations and lower-than-anticipated volumes in its regulated network division that mean some earnings will be pushed intoFY27. The rail haulage and logistics operator also unveiled a restructure that combines bulk operations and containerised freight division under George Lippiatt, the current CFO and strategy executive.

‍

The CFO and strategy role will be taken by current head of containerised freight Gareth Long, while Anna Dartnell, chief of bulk operations, will exit the company. Post the downgrade, we have cut our FY25 and FY26 EPS estimates by 15.1% and 4.1%, respectively, while our FY27 forecast rises 5.4%. This leads us to cut our target price to $3.10 from $3.20. There is some apparent value on offer in Aurizon, but we need greater confidence in its earnings outlook before adopting a more positive stance on the stock. Consequently, we maintain our Hold recommendation.