Emeco Holdings (ASX:EHL) is expected to deliver broadly flat fiscal year 2027 earnings following weaker rental equipment utilization in the second half, with Jarden remaining cautious on the near-term outlook despite the company's strong balance sheet and potential for capital returns, the firm said in a note on Wednesday.

The company attributed its softer second-half performance to weather disruptions and diesel supply concerns, which led mining customers to favor production and inventory drawdowns over equipment-intensive overburden removal despite supportive coal markets.

Jarden said the company's updated fiscal year 2026 guidance of underlying earnings before interest, taxes, depreciation, and amortization of AU$290 million to AU$295 million and underlying earnings before interest and taxes of AU$145 million to AU$150 million was modestly below expectations, prompting small cuts to its earnings forecasts through fiscal year 2028.

The company expects fiscal year 2027 earnings to be broadly in line with fiscal year 2026, with a stronger second half, while Jarden said the outlook was more constructive than expected but carries execution risk due to its second-half weighting.

The firm expects rental fleet utilization to remain under pressure until late in the first half of fiscal year 2027, although fuel-related operating constraints appear to be easing.

The firm noted the company's forecast fiscal year 2026 leverage of 0.4 times reflects its balance sheet strength and capital flexibility, but it wants to see improving utilization and earnings momentum before turning more positive, despite better valuation support after recent share price weakness.

Jarden reaffirmed its neutral rating on Emeco Holdings and lowered its price target to AU$1.05 from AU$1.30.

The company's shares fell 3% in recent Thursday trade.