Austin Engineering's (ASX:ANG) downgrade to its fiscal 2026 guidance is "disappointing," but the company's implied turnaround in the second half of the year remains intact and supports a positive outlook, Euroz Hartleys said in a Tuesday note.

The company cut its revenue outlook to around AU$325 million from over AU$350 million, and earnings before interest and tax (EBIT) outlook to between AU$10 million and AU$11 million from a previous range of AU$14 million to AU$16 million.

The downgrade reflects operational challenges in the Americas as well as the deferral of several sales and product deliveries into fiscal 2027, the investment firm said.

It added that the company's performance in South America has remained below expectations, while more efficiency gains are needed in North American operations to lift throughput and return margins to targeted levels.

Euroz Hartleys revised its own estimates to align with the new guidance, including a reduction of its fiscal 2027 EBIT forecast to AU$24.4 million from AU$31.1 million previously.

Despite a more gradual operational recovery and slower than anticipated turnaround, Austin Engineering's current share price represents "a compelling entry opportunity for buyers who back turnaround execution," the equity research firm said.

It maintain a speculative buy recommendation on Austin Engineering but reduced the target price to AU$0.30 from AU$0.35.

The company's shares advanced 7% in recent Wednesday trade.