Last week was not a fun week to own Oshkosh (NYSE:OSK) stock.

Once upon a time, a big Pentagon order for Oshkosh M-ATV armored trucks helped to save the company. Now the pendulum's swinging the other way. Source: Oshkosh.

The company formerly known as "Oshkosh Truck" turned itself into a one-truck pile-up after investors got a load of Q2 earnings Wednesday. Over the course of just one day of trading, Oshkosh saw nearly 14% of its market capitalization vaporized. Smash! Bam! $625 million worth of market cap, gone in a flash.

As you can imagine, the numbers were not pretty.

Sales of "access equipment" -- scissor lifts, telehandlers, and the like -- were up a decent 10% compared to Q2 2013 levels. Sales of commercial trucks such as concrete mixers and garbage trucks also performed well, rising 27% year over year. But the company's fire and emergency vehicle business (ambulances and fire trucks) saw sales decline 8%. And Oshkosh's "sexiest" business, which builds the kinds of high-profile, mine-resistant, ambush-protected (MRAP) armored trucks that have been dominating the headlines in Iraq and Afghanistan this past decade, quite simply fell off a cliff.

And it's here that our story really begins.

Live by the sword, die by the sword
Five years ago, the U.S. Pentagon single-handedly saved Oskhosh Corporation from extinction. Burdened by a crushing debt load, and with little income to support it, Oshkosh stock was circling the drain.

And then, a miracle happened.

Against all odds, in July of 2009, the Pentagon awarded Oshkosh a huge contract to build billions of dollars worth of all-terrain armored MRAP trucks for the U.S. Army and Marines. The Pentagon followed that up one month later with a contract to build thousands of Family of Medium Tactical Vehicles (FMTV) unarmored trucks, promising billions of dollars more revenue to Oshkosh. Between these two contracts, the Pentagon quite simply saved Oshkosh's life.

Over the years since, Oshkosh has used these revenues (and the profits they generated) to cut its debt load by more than half. With less than $500 million in debt (net of cash) today, the company's not entirely in the clear -- but it is once again a viable business.

That being said, Oshkosh can't depend on the military to save its bacon any longer. Last quarter's earnings results showed a steep -- you might even say "devastating" -- fall-off in sales of heavy trucks to the military. Sales from the company's defense segment declined by nearly half, falling to just $471 million. And with the loss of scale in this business, profits were decimated, declining 78% year over year.

When all was said and done, companywide sales were down 12%, with earnings falling twice as fast -- down 27% to just $1.22 per diluted share. No wonder investors abandoned ship.

What happens next?
As bad as this week's news was for Oshkosh, it could still get worse. With $268 million in trailing earnings, Oshkosh stock currently costs about 15 times earnings. That might not sound so bad, given that analysts who follow the stock expect Oshkosh to grow earnings at upwards of 14% annually over the next five years.

Unfortunately, though, "growth" is most decidedly not what we're seeing at Oshkosh. Rather, the opposite. And with the company struggling to turn even its limited GAAP profits into real cash profits (free cash flow at the company was only $168 million for the past 12 months -- an even $100 million less than reported earnings), I see little hope for a turnaround anytime soon.

Rich Smith has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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