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Why Is Oshkosh (OSK) Down 7.7% Since Last Earnings Report?

Zacks Equity Research

It has been about a month since the last earnings report for Oshkosh (OSK). Shares have lost about 7.7% 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 Beat Estimates, Up Y/Y

Oshkosh Corporation recorded earnings of $2.72 per share in the third quarter of fiscal 2019 (Jun 30, 2019). The figure beat the Zacks Consensus Estimate of $2.41. In the year-ago quarter, earnings were $2.20 per share. Net income was $191.9 million compared with $153.4 million in the year-ago quarter.

In the reported quarter, consolidated net sales rose 10% to $2.39 billion. The figure surpassed the Zacks Consensus Estimate of $2.30 billion. This upside can be attributed to higher sales in all the segments.

In the third quarter of fiscal 2019, consolidated operating income augmented 15.5% year over to $257.8 million (10.8% of sales).

Segmental Details

Net sales in the Access equipment increased 7.7% year over year to $1.25 billion, driven by rise in sales volume and higher pricing. In the quarter under review, operating income increased 27.2% to $189.9 million (15.2% of sales).

The Defense segment’s net sales increased 15.5% to $511.1 million, owing to higher sales to the U.S. government. Operating income fell 38.8% to $29.5 million (5.8% of sales).

Net sales in the Fire & Emergency segment rose 20.2% to $341 million. The upside was driven by sales of higher content units, application of new revenue recognition standard and improved pricing. Operating income increased 38.9% to $50.7 million (14.9% of sales).

Net sales in the Commercial segment inched up 0.3% to $296 million on the application of the new revenue recognition standard. The segment’s operating income declined to $21.5 million (7.3% of sales) from $25.1 million (8.5% of sales) in the year-ago quarter.

Financial Details

Oshkosh had cash and cash equivalents of $152.2 million as of Jun 30, 2019 compared with $454.6 million as of Sep 30, 2018. The company’s long-term debt was $818.7 million in the third quarter of fiscal 2019, similar to the figure recorded at the end of fiscal 2018.

In the first nine months of fiscal 2019, Oshkosh’s net cash provided by operating activities was $105.8 million compared with $220.2 million in the year-ago period.

Share Buyback Update

During the quarter ended on Jun 30, the company repurchased 1,166,914 shares of common stock for $88.9 million.

On May 7, 2019, the Board of Directors increased the company’s remaining common stock repurchase authorization to 10 million shares.

Dividend Announcement

Oshkosh’s board declared a quarterly cash dividend of 27 cents per share to shareholders. The amount will be paid on Sep 3 to shareholders as of Aug 19, 2019.

Fiscal 2019 Outlook

For fiscal 2019, the company anticipates consolidated operating income in the range of $760-$775 million, up from the previously stated view of $725-$755 million. Further, adjusted earnings per share are projected in the band of $7.90-$8.10 compared with $7.50-$7.80 mentioned earlier.


 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision.

VGM Scores

At this time, Oshkosh has a poor Growth Score of F, however its Momentum Score is doing a lot better with a B. Charting a somewhat similar path, 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 C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, 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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