Aurizon Earnings: Pleasing Recovery Driven by Higher Tariffs and Gradual Volume Improvement

Narrow-moat-rated Aurizon reported a strong first-half result on higher tariffs and, to a lesser extent, volumes. Management expects a softer second half because of wet weather impacts in recent weeks and other minor issues and maintained full-year earnings guidance. We leave our earnings forecasts unchanged and maintain our AUD 4.70 fair value estimate. We continue to think the stock is attractive, trading on a forward P/E of 16 and with solid growth potential from recovering coal haulage volumes and investment in noncoal bulk haulage. The firm offers a forecast 4.6% mostly franked dividend yield, with upside from earnings growth and a likely higher payout ratio from fiscal 2025 as financial health strengthens.