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For shareholders in military trucker Oshkosh (NYSE: OSK  ) , it's shaping up to be a fine summer indeed. Fresh from its victory over Force Protction (Nasdaq: FRPT  ) and General Dynamics (NYSE: GD  ) , Navistar (NYSE: NAV  ) and BAE in the competition to build an "MRAP-Lite" for the Afghan theater, Oshkosh notched its second victory in as many months yesterday.

It's a smaller victory this time. Still, investors gave Oshkosh a "standing O" on the news that it will build the Army's new Family of Medium Tactical Vehicles (FMTV). And yet, on the face of it, the news doesn't seem all that grand. At just $281 million, it's certainly not as large as the multibillion-dollar M-ATV contract that Oshkosh won last month, or the also-multibillion-dollar JLTV contract that Oshkosh lost last year ...

... at least, not until you notice that yesterday's award concerned only Oshkosh's first installment under the new contract. And that these 2,568 trucks and trailers amount to just 11.1% of the total 23,000 units anticipated for purchase under this indefinite delivery, indefinite quantity (IDIQ) contract.

IDIQ, therefore I am
Its name notwithstanding, though, I think we can at least take a crack at figuring out how much this "indefinite" contract is worth to Oshkosh. A is to B as C is to D, so so if 2,568 units nets Oshkosh $281 mil, that works out to just a skosh under $110,000 per truck. Multiply this average price by 23,000, and FMTV's total value to Oshkosh could equal $2.5 billion over five years.

So does Oshkosh have room to run?
It depends. Post-FMTV-news, Oshkosh gained about $428 million in market cap. Now, back in the go-go years under the hawkish President Bush, Jr., defense contractors were routinely awarded a market cap of about equal to their annual sales. If FMTV is worth $2.5 billion over five years, we can posit it will increase Oshkosh's annual sales by about $500 million -- which suggests that the increase in price did not capture the full value of the new contract.

But there's just one caveat: Bush is no longer in office, and investors no longer love defense cotnractors. Marquee names like Lockheed Martin (NYSE: LMT  ) , Boeing (NYSE: BA  ) , and Northrop Grumman (NYSE: NOC  ) are fetching P/S ratios ranging from 0.66 all the way down to just 0.45.

Foolish takeaway
In this environment, I'm wondering if debt-laden Oshkosh actually deserves a 1.0 ratio. Seems to me, its current 0.52 may be more appropriate ... in which case, Oshkosh investors could find themselves looking over a cliff, exclaiming, "Gosh, that first step's a doozy."

Fool contributor Rich Smith owns shares of Boeing and Force Protection. General Dynamics is a Motley Fool Inside Value pick. The Motley Fool has a disclosure policy.

Read/Post Comments (8) | Recommend This Article (9)

Comments from our Foolish Readers

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  • Report this Comment On August 28, 2009, at 5:57 PM, jrusso9722 wrote:

    Oshkosh represents very little risk to DOD. The "trust" was established early in Oshkosh's history. Superb specialty equipment that did not fail. Limited quantities of Specialty Equipment seemed the norm in past years, but THAT HAS ALL CHANGED. After the grueling deaths in Iraq, we are losing American Service Hero's to the beastiality of organisms who love to kill. Oshkosh has proven that it has the skill, engineering and design genius, manufacturing capacity, parts and service and a little thing called "paying their dues". America will not tolerate many more deaths in Afghanistan, and the politicians know it. Oshkosh is the new IBM.

    I respect Motley Fool for offerining us the opportunity to be heard-it cost's money to do this, and Motley Fool is paying the tab-generous!! President Bush is an honorable man. Who could do better. Atrocious comments about him would have these commentors beheaded in other countries. Worries about companies such as Lockheed-Martin, Northrup-Grumman, and Boeing are not a factor. These wonderful companies are generally "systems" companies, if you will. Oshkosh contracts protect troops on the ground, 1st Responders!!! More money is needed at this level, and Oshkosh has the stable of "life saving" equipment, that is NOW, NO MORE SPECIALTY EQUIPMENT, BUT EVERDAY NECESSITY EQUIPMENT. If that were not enough, pretty soon, trucks without drivers, will become a greater part of Military Transport. That's a mega-opportunity and Oshkosh has had a product since 2004. I receive no compensation for this, do not work for Oshkosh- I love the company. Joe Russo

  • Report this Comment On August 28, 2009, at 6:05 PM, jrusso9722 wrote:

    Hello to all, Joe Russo here: If you would care to read the many opinion posts I have offered regarding Oshkosh, please access AOL-Finance, and request a quote for OSK. Then, move to the area that says, "Discuss OSK". You will see the 60-70 opinions I have posted regarding Oshkosh. Read them if you care to. I receive no compensation, and am not a consultant, or employee to Oshkosh. I call it where I see it. Thanks again to Motley Fool, for paying for this space so that people like me can contribute. Joe Russo

  • Report this Comment On August 29, 2009, at 1:34 PM, Oshkosh2009 wrote:

    Oshkosh is on a roll and I'm happy for them. They're a good company with very solid products. How high do you guys think their stock will get to by the end of this year?

  • Report this Comment On August 29, 2009, at 6:01 PM, jrusso9722 wrote:

    Well, I'm on record at $38 per share, but that was before the dilution due to the new stock offering. I'll go with 38-42 by end of year.

  • Report this Comment On August 29, 2009, at 11:00 PM, goodone222 wrote:

    Osh appears to really be on a roll. M-ATV and FMTV in less than 2 months. Must really be impressing the users!!

  • Report this Comment On August 30, 2009, at 8:43 AM, jrusso9722 wrote:

    Hi Goodone222, OSK has always been the best at specialty defense equipment. Eng/Design/Manuf. are peerless. MTVR Truck/chassis was an instant hit. That chassis serves on M-ATV. TAK-4 Suspension is a game changer for the Pentagon-it's being refitted to thousands of other manufacturer's vehicles. More will come out on FMTV shortly. Regards.

  • Report this Comment On August 30, 2009, at 5:07 PM, jrusso9722 wrote:

    That's the Defense side. Airport and Municipal are strong. Pierce Fire and Rescue is at a high. Super Quality. Credit to Pierce Sales Organizations, and factory quality of engineering and design. Contributing alot to Oshkosh bottom line.

  • Report this Comment On September 20, 2009, at 8:24 PM, jrusso9722 wrote:

    TerraMax (tm) autonomous trucks, no drivers, are involved in a "rodeo" at Ft. Hood, Texas, to end on 9/3/09. In my opinion, Oshkosh stock could jump much, much higher, upon the Army's acceptance of the results of this rodeo. 230,000 military trucks, all with a driver, represent deadly risks. Even a small percentage of these trucks equipped with the TerraMax kit, will save lives, and cause a revolution in ground combat.

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