Foolish Forecast: Oshkosh Still Truckin'

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As we roll into August, the earnings reports just keep on trucking. Next up, Oshkosh Truck (NYSE: OSK) delivers a load of fiscal Q3 2007 earnings news.

What analysts say:

• Buy, sell, or waffle? Nine analysts tailgate Oshkosh, giving the stock seven buy ratings and a pair of holds.
• Revenue. On average, they're looking for sales to more than double to $1.79 billion, on revenue from last year's purchase of JLG Industries.
• Earnings. Profits are predicted to rise 42% to $1.02 per share -- significantly greater than the firm's own guidance of $0.90 to $0.95 per share.

What management says:
CEO Robert Bohn pronounced himself "pleased" with results last quarter, noting that the firm had beaten its own earnings estimates for Q2, and reaffirming full-year guidance for earnings per share between $3.15 and $3.25. Bohn said he was "encouraged by the strength we continue to experience with JLG," calling it a "strong and transformational business."

What management does:
Unfortunately, I think Bohn is right on that last point. In a Foolish Forecast I penned back in February, I advised investors to expect Oshkosh's margins to expand in future quarters, thanks to the absorption of JLG's higher-margin business. Shows you how much I know. As things turned out, the massive influx of sales from JLG isn't doing much at all to boost profit margins at the firm's new owner. To the contrary, gross, operating, and net margin have each been falling for two quarters straight.

Margins	12/05	3/06	6/06	9/06	12/06	3/07
Gross	17.0%	17.0%	17.6%	17.7%	17.3%	17.0%
Operating	9.4%	9.5%	9.9%	9.9%	9.2%	8.8%
Net	5.6%	5.6%	5.9%	6.0%	5.3%	4.4%

All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
Perhaps worse for Oshkosh, many rivals are grossing higher margins than it can manage these days. Federal Signal (NYSE: FSS), Gehl (Nasdaq: GEHL), Terex (NYSE: TEX), and Volvo (Nasdaq: VOLV) all gross greater than 20% of their sales. Why, even Armor Holdings (NYSE: AH) and Trinity Industries (NYSE: TRN) beat Oshkosh by a couple hundred basis points at the gross margin level.

Meanwhile, Oshkosh has acquired itself a whole slew of new competitors by entering the MRAP (short for "mine resistant ambush protected") race, winning a contract to build a tranche of the robust armored vehicles for the military. Now, in addition to Armor Holdings, Oshkosh gets to vie with Armor Holdings' new owner, BAE Systems, and even bigger names in armored vehicles, like General Dynamics. Investors can only hope that the military's urgent need to get these MRAPs in the field as quickly as possible will mean that the various rivals don't need to compete too much on price to win the contracts. Otherwise, Oshkosh's margins might be driven down even further.

There's a big difference between this Oshkosh and the one you were probably thinking of. Find out what it is in:

• Oshkosh Still Cheerfully Defensive
• Oshkosh Keeps Trucking
• Defense Is Good Offense for Oshkosh

Fool contributor Rich Smith does not own shares of any company named above.