ASX earnings season provides analysts and investors with a raft of fresh data and management insights to inform their view on a business.

The two companies we’ll look at today have not been strong performers over the past few years, but our analysts think the future looks brighter than the past.

Aurizon (AZJ)

Aurizon is comprised of three main business segments: its management of the monopolistic Central Queensland Coal Network or CQCN that it has leased until 2109, its own coal haulage business, and its non-coal rail haulage operations.

While Aurizon’s revenue and earnings from the CQCN are relatively reliable and subject to CPI-linked price increases, results from Aurizon’s haulage operations are often more varied. This played out in H1 of fiscal 2025, with weaker than expected haulage results undoing solid network income.

In the coal haulage segment, wet weather in central Queensland led to lower coal exports and lower train utilisation, while profit margins were hit by cost inflation and more of Aurizon’s revenue in the segment coming from less profitable contracts.

Atkins expects these headwinds to normalise soon and notes that the underlying trend in Aussie coal exports looks strong. He also appears sanguine on the outlook for non-coal haulage, which reported a 25% fall in adjusted pre-tax profits on lower grain volumes and a contract lapsing.

The non-coal haulage segment represents just 10% of revenues but is a key focus as Aurizon tries to decrease its reliance on coal and win support from ESG-conscious lenders.

This has entailed significant investments to capture more business in areas like grain and car transport, as well as a partnership to create a ‘landbridge’ rail freight solution from Darwin to Adelaide.

Aurizon’s investments in non-coal haulage haven’t yet bloomed but Atkins expects that a recovery and subsequent growth in grain shipping revenues could underpin improved earnings from this segment in coming years.

At a recent price of around $3.20 per share, Aurizon trades roughly 30% below Atkins’ Fair Value estimate of $4.50 and pays a partially franked dividend yield nearing 6%.

Aurizon

  • Economic moat: None
  • Fair Value estimate: $4.50 per share
  • Share price February 18th: $3.19
  • Star rating: Four stars

GPT Group (GPT)

GPT Group is Australia’s oldest REIT and generates income from three main types of property: retail makes up 42% of its most recent annual sales, office made up 32% and logistics properties made up 26%. All three segments also include revenues derived from GPT’s fund management business.

While logistics and high quality shopping centre assets like GPT’s have held up rather well, the company’s exposure to the beleaguered office segment has dragged on the shares in recent years.

GPT’s H1 earnings held good news on this front, with further strength in retail and logistics joined by solid office numbers that our analyst Yingqi Tan thinks hint at a turnaround.

“Like-for-like net property income grew 2%” her report on the company says. “Office occupancy improved to 95% in 2024 from 92% a year earlier, and leasing spreads, the difference in rents between existing and new lease contracts, remained positive at 5%.”

Looking forward, Yingqi thinks that GPT’s portfolio of premium and A-grade office buildings, which are mostly located in more supply-constrained areas like Sydney and Melbourne’s CBDs, are well placed to weather and even benefit from a persistent shift to hybrid working.

The same office space and desks can now be used by different employees at different times of the week, she says, which allows companies to get by on less space and relocate to more sought-after locations. A bit like drinking “less but better”, perhaps, but for those renting office space. Yingqi thinks this will continue to underpin robust demand for the best office buildings.

Meanwhile, she expects more solid performance from GPT’s retail and logistics portfolio. High population growth in GPT’s shopping mall catchment areas should drive good rental increases, while GPT’s logistics assets look well placed to increase rents. Almost 20% of the logistics portfolio’s leases are set to expire and reprice at market rates during 2025 and 2026.

GPT Group shares continue to languish below Yingqi’s Fair Value estimate of $5.70 per security, a situation that she ascribes to lingering concerns about the office market and uncertainty about the timing of potential interest rate cuts. Yingqi’s Fair Value estimate is around 8% ahead of the company’s net tangible asset value, which does not account for its fast-growing fund management operations.

Funds managed for clients in vehicles such as the GPT Wholesale Office Fund and GPT Wholesale Shopping Centre Fund have risen from $13 billion in 2019 to $22 billion in December 2024, with revenues from these efforts now comprising about one-fifth of GPT’s funds from operations. Yingqi expects that GPT’s brand and sound track record will continue to attract further inflows.

GPT Group

  • Economic moat: None
  • Fair Value estimate: $5.70 per security
  • Price February 18th: $4.78
  • Star rating: Four stars

Remember that individual shares should only be considered as part of a broader investing strategy. For a step-by-step guide to forming yours, see this guide by my colleague Mark LaMonica.

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Terms used in this article

Star Rating: Our one- to five-star ratings are guideposts to a broad audience and individuals must consider their own specific investment goals, risk tolerance, and several other factors. A five-star rating means our analysts think the current market price likely represents an excessively pessimistic outlook and that beyond fair risk-adjusted returns are likely over a long timeframe. A one-star rating means our analysts think the market is pricing in an excessively optimistic outlook, limiting upside potential and leaving the investor exposed to capital loss.

Fair Value: Morningstar’s Fair Value estimate results from a detailed projection of a company's future cash flows, resulting from our analysts' independent primary research. Price To Fair Value measures the current market price against estimated Fair Value. If a company’s stock trades at $100 and our analysts believe it is worth $200, the price to fair value ratio would be 0.5. A Price to Fair Value over 1 suggests the share is overvalued.

Moat Rating: An economic moat is a structural feature that allows a firm to sustain excess profits over a long period. Companies with a narrow moat are those we believe are more likely than not to sustain excess returns for at least a decade. For wide-moat companies, we have high confidence that excess returns will persist for 10 years and are likely to persist at least 20 years. To learn more about how to identify companies with an economic moat, read this article by Mark LaMonica.