Morningstar reduces Aurizon's long-term growth outlook, downgrades moat rating

Aurizon Holdings

01/10/2024 22:14

** Morningstar says Aurizon Holdings'  AZJ.AX  underlying
asset quality is good, but reduces long-term growth expectations
on lower capital expenditure assumptions
    ** "There is significant uncertainty about whether AZJ can
generate returns on invested capital above our estimate of the
company's cost of capital a decade from now" - Morningstar
    ** Brokerage downgrades Australian rail freight operator's
moat rating to "no-moat"
    ** Estimates AZJ's return on invested capital was 6.1% in
FY24, and sees it to remain below the firm's 7.3% weighted
average cost of capital for at least the medium term
    ** Analysts say they continue to forecast solid earnings
growth in the medium term as coal exports rebound following
prolonged wet weather in recent years
    ** Morningstar adds the stock remains undervalued and
expects it to rerate higher as coal exports rebound
    ** Stock down 7.4% YTD, as of last close
 

 (Reporting by Ayushman Ojha in Bengaluru)
 ((Ayushman.ojha@thomsonreuters.com))