Why has the Aurizon (ASX:AZJ) share price struggled this month?

What’s happened to the coal rail freight operator’s shares?

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The Aurizon Holdings Ltd (ASX: AZJ) share price has failed to gain traction in November following weak investor sentiment. The coal rail freight operator hasn’t released any price-sensitive announcements since its acquisition of One Rail Australia.

At the time of writing, Aurizon shares are down 0.59% to $3.39 for the day. However, since October 21, they are down more than 12%.

Below, we take a look at what’s weighing down the company’s share price.

What’s happening with Aurizon?

Investors have been sending the Aurizon share price lower following a strong retrace in the spot price of coal.

Since late last month, the price of coal has tumbled close to 40% after reaching a record high of US$280 per tonne in early October.

COVID-19-related disruptions, China import restrictions, and the global push for clean renewable energy sources have led to weaker demand for coal. Currently, the price of coal is around US$127 per tonne.

Despite the challenging markets, the company recently announced the purchase of One Rail Australia. This is expected to provide an additional growth platform, connecting central Australia operations. Increased commodity exposure to new markets will also further diversify the current bulk business.

The sheer size of the acquisition nearly doubles Aurizon’s existing rail infrastructure. However, some brokers appear pessimistic about the latest takeover as this will affect shareholder payouts.

Swiss investment firm UBS rated the company as “neutral” from “buy”, and slashed its outlook by 33% to $3.50 per share.

RBC Capital Markets also followed suit, downgrading to an “underperform” status, as well as cutting its rating by 8.3% to $3.30 apiece. Based on the current share price, this implies a downside of around 2.6%.

Aurizon share price summary

Up until late October, the Aurizon share price had been in positive territory for the past 12 months. However, a strong selloff led its shares to hit a multi-year low of $3.35 last week.

Currently, the company’s share price is treading 20% lower than it was this time last year and is down around 12% year-to-date.

Aurizon presides a market capitalisation of roughly $6.28 billion, with approximately 1.84 billion shares on issue.

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Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Aurizon Holdings Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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