The Austal Ltd (ASX: ASB) share price has been sinking in recent weeks.
At the time of writing, the defence shipbuilder’s shares are down 1.25% to $4.73. This leaves the stock down 20% over the past month and not far above its 52-week low of $4.04 reached during the March 2025 market sell-off.
Let’s take a closer look at what has happened and whether Austal shares can turn the clock back.
A clear reset in expectations
The recent decline follows a material shift in expectations after Austal downgraded its FY26 earnings guidance.
The company revealed that its prior outlook had included an overstatement tied to incentives within its US operations. This resulted in EBIT guidance being reduced to approximately $110 million.
While the company still reported solid top-line growth in its most recent half, the downgrade has weighed on sentiment.
There are also ongoing pressures within the US business. Cost challenges and legacy contract issues continue to impact margins, even as revenue in that segment remains solid.
Share price trend remains weak
The trend in Austal shares is still pointing lower.
Over the past several months, the stock has formed a pattern of lower highs and lower lows. The recent move back toward the $4.70 range has reinforced that downward momentum.
In addition, the relative strength index (RSI) has been sitting in the lower range, pointing to weak buying interest. While it has not reached deeply oversold levels, it indicates the stock is still lacking strong support from buyers.
Key support appears near the $4 to $4.20 range, close to the previous 52-week low. On the upside, resistance may sit around $5.50, where the stock traded before the latest sell-off.
What could drive a turnaround?
Despite the recent weakness, Austal continues to operate in a sector supported by long-term demand.
The company has a $17.7 billion order book and remains exposed to rising defence spending, particularly in the United States and Australia.
In the near term, performance is likely to come down to execution rather than broader industry trends.
If the company delivers on its revised guidance and improves margins in its US operations, investor confidence may begin to recover.
Foolish Takeaway
Austal remains a sizeable defence contractor with a strong pipeline of work. However, recent events have shifted the focus back to its operational performance.
The downgrade has reset expectations, and the burden is now on management to deliver consistent results from here.
Until that happens, the market may remain hesitant.
The post Down 20% in a month, can this ASX defence stock make a turnaround? appeared first on The Motley Fool Australia.
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Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.