The market may be close to a record high, but that doesn't mean there aren't strong potential returns out there.
For example, the ASX 200 stock in this article has been tipped to deliver a market-beating return over the next 12 months by analysts at Macquarie Group Ltd (ASX: MQG). Here's what the broker is saying about it.
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Which ASX 200 stock?
The stock that Macquarie is bullish on is rail freight operator Aurizon Holdings Ltd (ASX: AZJ).
It notes that the company recently held its annual general meeting and revealed that it was delaying its change of chair. Macquarie thinks this may be due to a potential asset sale. The broker said:
New Chair decision has been pushed back to the coming months, but the change has been reiterated. We see this blending into the second decision around whether to partially sell the network business, which is likely to be made under the new Chair. The decision will be made by February, which is reflective of the UT6 negotiation being principally complete.
Macquarie also highlights that industry data has been relatively neutral for the ASX 200 stock. As a result, it has held firm with its earnings estimates. It adds:
Operationally data is relatively neutral. Below rail will underperform the regulated outcome, but this is as expected, and AZJ will report based on the regulated outcome. Above rail recovery in volumes is yet to emerge, and bulk indicators appear neutral, thus EBITDA outlook is unchanged at $1.68-1.75bn. For the first time AZJ has provided dividend guidance of $0.19-0.20 (MRE $0.196, VA $0.195).
Upgrade to outperform
In response to the update, Macquarie has upgraded the ASX 200 stock to an outperform rating with an improved price target of $3.70.
Based on its current share price of $3.40, this implies potential upside of 9% for investors over the next 12 months.
In addition, Macquarie is expecting an attractive dividend yield of approximately 5.8% in FY 2026.
Combined, this boosts the total potential return from Aurizon's shares to almost 15%.
Commenting on its upgrade, the broker said:
Upgrade to Outperform from Neutral. TP raised to $3.70ps (prev $3.34) reflecting a higher network RAB multiple. Network realisation maybe positive but at a cost of future flexibility. Change of Chair potentially see strategy revision to address the core issue, inconsistent above rail growth.
Catalysts: Progress on UT6 enables the potential realisation of below rail, albeit we are unconvinced of the strategic benefit. Evidence of some delivery in bulk and freight segment, and coal recontracting
