In the good books
- Aurizon Holdings (AZJ) was upgraded to Neutral from Sell by Citi and to Equal-weight from Underweight by Morgan Stanley
First half results revealed a decline in earnings from continuing operations of -16%. Citi forecasts underlying EBIT for the non-network business towards the mid-point of management's guidance range of $390-430m. Citi revises FY19 estimates to reflect the fact Aurizon has chosen to account for the implementation of the UT5 decision in FY19, rather than extend the regulatory uncertainty further. The broker expects an 18% lift in underlying EBIT in FY20. As a result of the clearer outlook for the network earnings, the broker lifts its rating to Neutral from Sell and raises the target to $4.40 from $3.80.
As regulatory uncertainty recedes Morgan Stanley suspects the focus will now shift to the company's legal and capital structure.