Oshkosh Earnings: an Early Look

With hundreds of companies having already reported quarterly results, we're now in the heart of earnings season. The key to making smart investment decisions with stocks releasing their quarter reports is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed knee-jerk reaction to news that turns out to be exactly the wrong move.

Let's turn to Oshkosh (OSK -0.87%). The specialty vehicle maker has been under siege for a long time from the threat of defense budget cuts, but lately, the stock has soared on the apparent belief that such cuts are unlikely to hurt its overall business. Let's take an early look at what's been happening with Oshkosh over the past quarter and what we're likely to see in its quarterly report on Friday.

Stats on Oshkosh

Source: Yahoo Finance.

Will Oshkosh rev up its earnings engines?
Oshkosh has an uncanny ability to crush analysts' earnings estimates. In all of the most recent four quarters, the company has beaten estimates by at least 25%, twice providing 50% beats. The stock seems to be anticipating great results this time as well, with the shares having risen 14% since mid-October.

Much of the interest in Oshkosh lately has come from Carl Icahn, who offered to buy the company in October. He said that he was interested in combining the company with Navistar (NAV) in order to combine the two trucking and vehicle companies. Yet Oshkosh management rejected the $32.50 per share offer, and after a tender offer drew only 22% of shares, Icahn dropped his bid in early December.

But even with defense budget concerns, Oshkosh has had some successes in getting government contracts. Earlier this month, the company got a nearly $195 million contract for armored medium tactical vehicles which modified an existing contract with the Department of Defense. Of even more importance will be the company's role in Lockheed Martin's (LMT -0.75%) joint light tactical vehicle project, which beat out Navistar, BAE Systems, and General Dynamics (GD -0.17%) to let the vehicle enter the engineering and manufacturing development phase this past summer.

More importantly, many are skeptical that the defense budget can really get ratcheted back. Even if the U.S. does spend less, foreign governments might well pick up the slack, providing Oshkosh with new potential revenue sources.

In Oshkosh's earnings report, it'll be important to look for ways in which the company is preparing for what could result from government budget negotiations. Even with cautious optimism, Oshkosh could easily run higher from here if it can once again make analysts look silly with their projections.

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