Why Is Oshkosh (OSK) Down 0.1% Since Last Earnings Report?

It has been about a month since the last earnings report for Oshkosh (OSK). Shares have lost about 0.1% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Oshkosh due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Oshkosh Q3 Earnings & Revenues Top Estimates, Up Y/Y

Oshkosh Corporation’s third-quarter fiscal 2018 adjusted earnings were $2.20 per share, beating the Zacks Consensus Estimate of $2.02. In the year-ago quarter, the bottom line was $1.84. Net income was $164 million compared with $139.8 million in third-quarter fiscal 2017.

In the reported quarter, net sales rose 6.8% to $2.18 billion from $2.04 billion a year ago. Moreover, it outpaced the Zacks Consensus Estimate of $2.15 billion. The rise in sales was primarily due to an increased demand for access equipment, partly offset by lower-than-anticipated defense segment sales.

During the third quarter of fiscal 2018, consolidated operating income increased 5% to $222 million (10.2% of sales) compared with $212 million (10.4% of sales).

Segmental Details

Net sales of Access equipment increased 18.4% to $1.2 billion, driven by an enhanced demand for both aerial work platforms and telehandlers. Operating income increased 14.7% to $149 million (12.9% to sales). The rise was due to the higher sales volume and improved price realization, partly offset by challenges associated with the increase in production volumes, unfavorable product and customer mix, amplified freight costs, and adverse foreign exchange rates.

Defense segment’s net sales decreased 8.3% to $443 million due to the absence of international Mine Resistant Ambush Protected-All Terrain Vehicle (M-ATV) sales, partly offset by increased sales to the U.S. government. Operating income decreased 24% to $48 million (10.7% of sales), primarily due to the lower sales volume and an adverse product mix, partially offset by an improved manufacturing performance and lower warranty costs.

Net sales of the Fire & Emergency segment rose 0.3% to $284 million. The rise was driven by improved pricing. Operating income increased 18.2% to $36 million (12.8% of sales) due to increased pricing, partly offset by higher selling, general and administrative expenses.

Net sales of the Commercial segment were $2.9 million, almost similar to the third quarter of fiscal 2017. Higher refuse collection vehicle volume contributed to the quarterly sales. Operating income increased 16.2% to $25 million (8.5% of sales) due to increased sales, improved product mix, and lower selling, general and administrative expenses, partly offset by higher material costs.

Financial Details

Oshkosh had cash and cash equivalents of $372 million as of Jun 30, 2018, compared with $447 million as of Sep 30, 2017. The company’s long-term debt was $818 million as of Jun 30, 2018, compared with $808 million recorded on Sep 30, 2017.

For the nine months ended on Jun 30, 2018, Oshkosh’s net cash provided by operating activities was $220 million compared with $124 million a year ago.

Share Buyback Update

During the reported quarter, the company bought shares for $38.1 million and completed repurchasing 523,294 units of common stock.

Dividend Announcement

Oshkosh’s board declared a quarterly cash dividend of 24 cents per share to its shareholders. The amount will be paid on Aug 30 to shareholders as of Aug 16, 2018.

Fiscal 2018 Outlook Update

For fiscal 2018, the company anticipates consolidated sales of $7.6-$7.65 billion compared with the previous estimation of $7.4-$7.6 billion. Further, adjusted diluted earnings per share are projected to be $6-$6.1 compared with the previous guidance of $5.4-$5.85.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 6.8% due to these changes.

VGM Scores

At this time, Oshkosh has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Zacks style scores indicate that the company's stock is suitable for value and growth investors.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Oshkosh has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.

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