The team at Ord Minnett has just released updated guidance on ASX 200 stock Aurizon Holdings Ltd (ASX: AZJ).
The company is Australia's largest rail freight operator. It hauls bulk commodities, largely coal, as well as iron ore and agricultural products.
The company owns one of the world's largest coal rail networks. The network links around 50 mines to three major ports in Queensland.
The rail network, comprising 2,670 kilometres of lines under a 99-year lease from the Queensland government, accounts for the majority of Aurizon's earnings.
In 2026, this ASX 200 stock has raced ahead of the broader market.
Since January, it has risen just over 15%, compared to a flat return for the S&P/ASX 200 Index (ASX: XJO).
At the time of writing on Wednesday afternoon, shares are trading at $4.14 each.
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What is Ord Minnett's latest view?
In a note out of Ord Minnett, the broker seemed impressed by the half-year results.
Aurizon Holdings posted a first-half FY26 net profit around 10% higher than market expectations, driven by lower-than-forecast unit costs and higher-than-anticipated yields from its above-rail coal operations, and launched another share buyback valued at $100 million.
The broker said the key positive from the result was an increase in its dividend payout ratio to 90% (previously 80%).
Ord Minnett said this is a level the company aims to maintain into the future.
FY guidance updated
Ord Minnett also highlighted that Aurizon reiterated guidance for FY26 group operating earnings (EBITDA) of $1.68–$1.75 billion, versus market expectation near the midpoint at $1.71 billion, with EBITDA from its network, coal and bulk divisions all "expected to be higher than FY25".
Dividend guidance for FY26 was also upgraded to $0.22–$0.23 per share from $0.19–$0.20.
We highlight that incorporating the new dividend guidance and the $250 million in share buybacks already launched in the current fiscal year shows Aurizon is offering a total distribution yield, i.e.dividends plus share buybacks, of circa 7–8% in FY26.
For FY27, incorporating Ord Minnett's EPS estimates, a 90% dividend payout ratio, and our forecast for another $250 million share buyback given Aurizon has sufficient balance sheet capacity, the total distribution yield would rise to around 9–10%.
Hold recommendation on valuation grounds
Based on this guidance, Ord Minnett raised its earnings per share estimates by 2.7%, 3.5% and 0.9% for FY26, FY27 and FY28, respectively.
These earnings upgrades led us to increase our target price on Aurizon to $3.50 from $3.10, although we maintained our Hold recommendation on valuation grounds.
Despite the target price increase, this ASX 200 stock is currently trading at $4.14 per share, which is 15% above Ord Minnett's target.
