The Aurizon Holdings Ltd (ASX: AZJ) share price has been a disappointing performer so far this year.
Since the start of the year, the rail freight operator's shares have fallen 0.5%.
This compares unfavourably to an 8.5% gain by the S&P/ASX 200 Index (ASX: XJO) over the same period.
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Where next for the Aurizon share price?
The good news is that one leading broker believes the Aurizon share price could be heading higher from here.
According to a note out of Morgans from last month, the broker has upgraded the company's shares to an add rating with an improved price target of $4.14.
Based on the current Aurizon share price of $3.90, this implies potential upside of 6% over the next 12 months before dividends.
In addition, Morgans is forecasting a 28 cents per share dividend in FY 2022. Including this, the potential total return stretches to 13%.
What did the broker say?
Morgans noted that it was hard to ignore the potential returns on offer based on the Aurizon share price at the time.
It commented: "We upgrade to ADD, given improved return potential at current prices. This includes c.7% dividend yield and c.9% upside [at the time] to our revised target price of $4.14."
The broker also likes Aurizon due to its defensive qualities and strong capital position.
Morgans said: "AZJ's revenue protections and the essential and long-dated nature of its assets make its earnings less correlated with the business cycle, providing a defensive element to a portfolio. Also, its strong cashflows and debt capacity give it flexibility to pursue growth investment and/or undertake capital management initiatives."
And while its analysts acknowledge that there are ESG and sustainability concerns, it "would expect AZJ's cash yield (7.5%) and cheap trading multiples (7x EV/EBITDA, 13x PER) to attract value investors tolerant [of this]."
