On Tuesday, RBC Capital adjusted its stance on Aurizon Holdings (AZJ:AU) (OTC: QRNNF) stock, raising it from Underperform to Sector Perform, while also reducing the price target to AUD3.50 from AUD3.80.
The revision follows Aurizon's announcement of its financial year 2024 (FY24) results, which showed an underlying EBITDA of $1,624 million, marking a slight decline compared to RBC Capital and consensus estimates.
The company also provided guidance for FY25, projecting EBITDA to be between $1,660 million and $1,740 million, which is below RBC Capital and consensus forecasts by 4% and 3%, respectively.
Aurizon's share price has experienced a significant downturn over the past three months, including a 9% drop on Tuesday. According to RBC Capital, this decrease approximately accounts for the subdued earnings outlook presented. The firm believes that at the current levels, there is limited valuation downside for Aurizon's shares.
The transportation and logistics company has made considerable investments totaling over $2 billion to develop its Bulks and Freight strategies. RBC Capital notes that it requires clear evidence of successful execution of these strategies before adopting a more positive outlook on Aurizon's stock.
Despite the decrease in the 12-month price target, RBC Capital's upgrade to Sector Perform indicates a neutral perspective on the stock's near-term performance. This adjustment comes as the market has already reacted to Aurizon's recent financial results and future earnings guidance.
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