The Austal Ltd (ASX: ASB) share price has stormed a whopping 244.49% higher over the past year.
At the ASX open on Tuesday morning, the share price is up another 1.82% to $7.82 a piece.
It's a success story that has caught the attention of many Aussie investors.
But the question is, have Austal shares reached a ceiling? Or can we expect even more share price growth from the Australian-based shipbuilder?
Here's what Macquarie Group Ltd (ASX: MQG) expects from the shares over the next 12 months.
Austal shares navigate neutral waters
In a recent note to investors, the broker confirmed its neutral rating on Austal shares, unchanged since June.
It also raised its target price to $7.95 per share, up from $7.05 previously. At the time of writing, this represents a small 1.7% upside for investors over the next 12 months, significantly less than the 245% investors have enjoyed since September 2024.
"TP +13% to $7.95 ($7.05 prior) reflects upgrades of ~8% and moving TP to top end of valuation range (from midpoint), underpinned by improving operating and earnings momentum, and strong global demand for defence exposure (and limited ASX options)," Macquarie said in its note.
The broker added that Austal's outlook remains favourable with plenty of growth opportunities. It also expects revenue and earnings growth for FY26.
"The business is strongly positioned for medium-term earnings growth. Management has executed well, diversifying the business over the last ~5 years. ASB is one of few ASX companies that provides exposure to rising defence spending, hence we expect support under current valuation. Retain Neutral."
The broker revised its forward-looking earnings per share following the company's FY25 results posted last week.
For FY26, FY27, and FY28, Macquarie has revised its EPS by -4.5%, +8.5%, and +5.0%, respectively.
What else did Macquarie have to say about Austal?
Macquarie is pleased with Austal's FY25 earnings before interest and tax (EBIT). The result is 5% higher than Macquarie estimates and 15% higher than market consensus.
"Australasia segment EBIT of $36m beat MRE/VA by +110%/+207%, which offset softer US EBIT of $98m, coming in -12%/-16% below MRE/ VA."
The broker also noted that Austal's strategic shipbuilding agreement has been completed. Austal and the Commonwealth of Australia recently announced the official signing of "Austal Defence Shipbuilding Australia", a wholly owned subsidiary of Austal.
"The landmark agreement formally appoints ASB as the strategic shipbuilder for Tier 2 surface combatants at Henderson, WA. ASB will act as prime contractor and is expected to deliver both the 18 Medium Landing Craft (LCM) and 8 Heavy Landing Craft (LCH). The contract structure will be a target cost incentive model with performance-based gainshare/painshare mechanisms."
Going forward, the company's US outlook continues to improve, while in Australasia, Austal has a stronger operational execution with a building order book.
"Revenue grew +45% YoY and a big turnaround in performance in 2H25 drove EBIT of $36.0m, from a -$12.6m loss in FY24. With the SSA signed, the LCM & LCH have grown the order book by ~$4-5b, while the Commercial ferry book is in its strongest position after numerous contracts over the last ~12m," the broker said.
