Here's Why Oshkosh (OSK) Makes for a Solid Investment Choice
Oshkosh Corporation OSK is a producer and seller of a varied range of vehicle bodies and specialty vehicles. The company’s strong order backlog in the Access Equipment segment and significant program wins in the Defense segment are major tailwinds.
The Zacks Consensus Estimate for Oshkosh’s 2023 revenues and earnings per share is pegged at $9.66 billion and $9.07, respectively, implying a rise of 16.6% and 162.1%, respectively, from the year-ago reported number.
Let’s discuss the factors that highlight why Oshkosh is an attractive pick.
Growth Indicators
The acquisition of Pratt Miller enables Oshkosh to navigate the untapped market of un-crewed ground vehicles and establish a robust foothold there, enhancing its offerings.
The acquisition of CartSeeker Technology and a minority investment in Robotics are also likely to boost long-term prospects.
JBT's AeroTech business buyout is expected to contribute to the company’s growth and margins and deliver solid recurring revenues from its aftermarket parts and services offerings.
The Hinowa buyout has expanded Oshkosh’s manufacturing capabilities in Europe, accelerated electrification capabilities and provided additional growth opportunities across core and adjacent markets.
The strong outlook for the Access Equipment segment sparks optimism.
The company envisions segmental sales of around $5 billion, up from the prior guidance of $4.9 billion.
The operating margin is anticipated to be around 15%, indicating an improvement from the prior guidance of 14%.
The company ended the third quarter with a backlog of roughly $3.9 billion in the Access Equipment segment.
Solid demand is led by robust market metrics like aged fleets and a large number of mega projects in the United States.
The company expects 2023 vocational sales of around $2.5 billion, the same as the prior guidance, but it has raised its adjusted operating margin’s guidance to 9.5%, up from the previous guidance of 7.25%.
The firm’s balance sheet strength and investor-friendly moves instill optimism. The total debt-to-capital ratio is 0.14, lower both in absolute and relative terms. In 2022, it hiked its dividend by 10.8%, marking the ninth consecutive year of double-digit percentage increases.
A record consolidated backlog of $16 billion (approximately $4 billion in Access Equipment, $6.7 billion in Defense and $5 billion in Vocational) provides enough visibility for the coming years.
Frequent business wins and a comprehensive offering of innovative new products are set to drive Oshkosh’s prospects. An upbeat full-year 2023 outlook raises confidence. The company forecasts 2023 adjusted EPS, revenues and adjusted operating income at around $9.50, $9.65 billion and $875 million, respectively, implying an improvement from $3.46, $8.28 billion and $372.3 million, respectively, registered in 2022.
Significant program wins in its Defense segment offer long-term growth. For instance, the 10-year contract from the United States Postal Service (“USPS”) to modernize the latter’s fleet of postal delivery vehicles positions Oshkosh well for growth. When OSK achieves full-rate production, the USPS contract is expected to contribute more than $1 billion in revenues annually. Oshkosh anticipates important program wins like the NGDV (Next Generation Delivery Vehicle) and MCWS (medium caliber weapon system) to drive profitability over the next several years.
Favorable Style Score & Zacks Rank
OSK carries an impressive Value Score of A. Value Score helps find stocks that are undervalued. OSK currently carries a Zacks Rank #2 (Buy). Back-tested results have shown that stocks with a favorable Value Score, in combination with a solid Zacks Rank, are the best investment bets.
Other Key Picks
Some other top-ranked players in the auto space are Volvo VLVLY, Renault SA RNLSY and BYD Company Limited BYDDY, each sporting Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for VLVLY’s 2023 sales and earnings indicates year-over-year growth of 4.2% and 65.6%, respectively. The EPS estimates for 2023 and 2024 have increased by 2 cents each in the past 30 days.
The Zacks Consensus Estimate for RNLSY’s 2023 sales and earnings indicates year-over-year growth of 4.5% and 128.1%, respectively. The EPS estimates for 2023 and 2024 have increased by 15 cents and 2 cents, respectively, in the past 30 days.
The Zacks Consensus Estimate for BYDDY’s 2023 sales indicates year-over-year growth of 160.2%. The EPS estimates for 2023 and 2024 have increased by 62 cents and 57 cents, respectively, in the past 60 days.
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