Aurizon Holdings

Aurizon Holdings FY20 earnings beat expectations with EBIT of $910m, this was within the mid point of FY20 guidance of $880-930m.

FY21 EBIT guidance was 6% lower than consensus. Forward yield remains attractive at 5.%. Little in the way of EPS growth and a 100% dividend payout ratio provides a cap to the upside.

AZJ has initiated a new $300m on-market buyback which will help underpin the stock price. This is a good candidate for an at-the-money buy-write to drive portfolio cash flow.

Aurizon 1H20 Earnings

Aurizon Holdings reported 1H20 earnings which were mostly in-line with market forecasts.

1H20 EBIT of $456 million with underlying EPS of $0.136cps. The company continues to payout 100% of earnings in dividends.

Full-year 2020 EBIT guidance remains unchanged at $880m – $930m and the share buy-back program has increased to $400m in FY20.

ALGO Buy Signal For AZJ

Our ALGO engine triggered a buy signal for Aurizon Holdings on Tuesday at $4.24.

This “higher low” chart pattern is referenced to the low of $4.10 posted on June 13th.

AZJ’s FY2018 results, which were released last week, showed a modest 1% decrease in revenue from last year, but the underlying EBIT of $940 million was up 6% from 2017.

With a total dividend of 27 cents, the stock has an effective yield of 6% at current prices.

We expect the initial price target of $4.60 to be reached over the medium term.


Algo Update – Short AZJ

Our Algo Engine flagged the recent “lower high” structure in AZJ, and we’ve been highlighting the trade on the blog as one of our preferred shorts.

The stock is $0.40 lower today from last weeks $5.40 high.

Our concern with AZJ, relates to the unsustainable payout ratio.

The downside momentum looks to be increasing for a move to the early October lows near $4.75.