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

Reuters10-02

** Morningstar says Aurizon Holdings' 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))

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