Aurizon share price charges higher on half-year earnings beat

The rail freight operator has outperformed expectations during the first half.

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The Aurizon Holdings Ltd (ASX: AZJ) share price is pushing higher on Monday afternoon.

At the time of writing, the rail freight operator's shares are 3% to $3.87.

Investors have been buying Aurizon's shares following the release of its half-year results.

Aurizon share price higher on results release

Here's a summary of how the company performed during the six months ended 31 December:

  • Revenue up 16% to $1,972 million
  • Underlying EBITDA up 26% to $847 million
  • Underlying net profit after tax up 40% to $237 million
  • Underlying earnings per share up 40% to 12.9 cents
  • Interim dividend per share up 39% to 9.7 cents

What happened during the half?

During the first half, Aurizon was on form and delivered a 16% increase in revenue to $1,972 million and a 26% jump in underlying EBITDA to $847 million.

The latter was driven by growth across all businesses.

Coal EBITDA increased 23% to $283 million, with higher revenue resulting from increased volumes (up 4%) and improved revenue yield due to the mix of volume between corridors and customers, in addition to CPI indexation.

Aurizon's Bulk EBITDA increased 12% to $112 million. This was driven by volume recovery and new contracts, offset by customer specific production issues and lower grain volumes

The star of the show was its Network business. Network EBITDA increased 34% to $486 million thanks to a recovery in volumes (up 3%) and an uplift in the Maximum Allowable Revenue.

On the bottom line, underlying net profit after tax was up 40% to $237 million, which allowed the Aurizon board to lift its interim dividend by 39% to 9.7 cents per share.

How does this compare to expectations?

This result was slightly ahead of expectations, which explains why the Aurizon share price is lifting today.

Here's what Goldman Sachs is saying about the result:

Group Revenue of A$1,972m was +1% vs. GSe and +3% vs. Visible Alpha Consensus Data. Group EBITDA of A$847m was +3% vs. GSe and consensus. Assuming a 50% 1H/2H skew, this run rate is ~3.6% above the FY24 guidance midpoint (range A$1,590-1,680m).

Management commentary

Aurizon managing director and CEO, Andrew Harding, was pleased with the half. He said:

This was a strong result for the half, underpinned by solid performance in the Network and Coal businesses and with continued revenue and volume growth in Bulk and Containerised Freight. Further investments were made during 1HFY2024 in new rollingstock, port and terminal equipment across our national footprint and will continue in 2HFY2024 aligned with equipment delivery. This will ensure Aurizon is well-positioned for current growth opportunities, as well as emerging markets.

Outlook

Management has maintained its guidance for FY 2024. It expects group underlying EBITDA in a range of $1,590 million to $1,680 million.

It is also guiding to sustaining capex of $600 million to $660 million (including ~$40 million of transformational project capital) and growth capex of $250 million to $300 million.

The Aurizon share price is now up 12% over the last 12 months.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs Group. The Motley Fool Australia has recommended Aurizon. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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