An in-line result from
-
-Guidance for the coming year implies up to 6% growth on FY22 results
-Growth guidance has largely disappointed as coal decline drags
While rail freight operator
The company achieved full year earnings of
The Bulk segment was highlighted as delivering a disappointing result, reportedly missing its internal earnings target by -21%. Earnings of
Alongside its results the company has provided initial guidance for FY23, implying 0.0-5.5% growth and largely disappointing against expectations. Guidance for the coming year including a maiden earnings contribution from One Rail Bulk, which is expected to provide an
Given this, even the top end of growth guidance of 5.5% implies some earnings benefit will be lost to declines in coal as high margin contracts come to an end.
The company flagged that despite a 5% volume improvement in coal, it expects earnings will decline as contract renewals are made at lower margins.
Upcoming contract opportunities could supplement company earnings, with South32's ((S32)) Dendrobium mine seeking services through to 2035, and Idemitsu's Boggabri seeking services through to 2037, while
Divestment ahead flagged as a catalyst
With the One Rail acquisition completing in July, the brokers are largely in agreeance that divestment of the East Coast Rail asset will be a next catalyst for
The company has stated it has engaged with around ten potential acquirers for its East Coast Rail asset, and non-binding bids from interested parties are due in September
Following the release of
Morgans (Add rated with a target price of
Morgans' modelling assumes East Coast Rail is sold at enterprise value of
Despite describing the stock as offering a balanced risk-reward outlook, Citi (Neutral rated with a target price of
The Citi analysts noted despite meeting expectations in FY22, the company's result was compositionally lower quality. Looking ahead, the broker also continues to see an elevated likelihood of a return of La Nina weather later in 2022, impacting on volumes. Citi revised it net profit forecasts -2%, 4% and 6.5% through to FY24, accounting for the softer near-term coal outlook.
Describing the FY22 result as disappointing, Macquarie (Neutral rated with a target price of
The broker sees coal margins dropping to FY17 levels and dragging on earnings ability but anticipated the company will benefit from gains come FY24. Macquarie has updated its earnings per share outlook by -11.6%, -6.3% and 9.2% through to FY25 to reflect softer coal margins in the next year.
FNArena is proud about its track record and past achievements: Ten Years On
All material published by
© 2022 Acquisdata Pty Ltd., source