As we roll into February, the earnings reports just keep on trucking. Tomorrow morning, Oshkosh Truck (NYSE: OSK) delivers its first fiscal 2008 quarterly report.

What analysts say:

  • Buy, sell, or waffle? Eleven analysts tailgate Oshkosh, giving the stock eight buy ratings and three holds.
  • Revenues. On average, they're looking for quarterly sales to rise 54% to¬†$1.55 billion.
  • Earnings. Profits are predicted to slip 9% to $0.50 per share.

What management says:
With a name as evocative of childhood as "Oshkosh," it's nice to see that this company plays well with others. The truck-making Oshkosh bought out JLG Industries in 2006, and in 2007 followed up on that deal with a pair of headline-making partnerships. First it paired with Ceradyne (Nasdaq: CRDN) -- to build a "BULL" armored truck that will compete with General Dynamics (NYSE: GD), BAE Systems, Navistar, and Force Protection (Nasdaq: FRPT) for MRAP contracts. Most recently, Oshkosh allied itself with Northrop Grumman (NYSE: NOC) to bid for the Army's next-generation Humvee.

It feels strange to speak of playing well with others in the context of building military vehicles, but the fact remains: Oshkosh is making some seriously smart tie-ups ...

What management does:
... which are starting to make themselves felt on the income statement. For two quarters running now, Oshkosh has improved its gross and operating margins.

Margins

6/06

9/06

12/06

3/07

6/07

9/07

Gross

17.6%

17.7%

17.3%

17.0%

17.2%

17.5%

Operating

9.5%

9.5%

8.9%

8.5%

9.0%

9.4%

Net

5.9%

6.0%

5.3%

4.4%

4.3%

4.3%

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:
Granted, the truck maker's net margin is looking a bit underpowered -- but that's only to be expected. Oshkosh took on a big slug of debt to fund its JLG purchase, and is paying the consequences in the form of interest on that debt. Over the past year, interest costs alone have siphoned off $201 million in pre-tax profit.

Now, ordinarily, when I see so much cash going to pay interest on debt, my instinctive response would be: "Hey, Oshkosh! You've generated about $304 million in trailing free cash flow over the last 12 months. Time to start paying down that debt. At $3 billion or thereabouts, it's going to take you a decade to do it, so better get cracking."

Ordinarily, that's what I'd say. But, to be honest, with the economy slipping into recession and the Fed cutting interest rates every chance it gets, I expect Oshkosh's interest costs are going to moderate just fine on their own. If I had one wish for the contents of tomorrow's earnings report, it would be to see that the company kept debt payments to the barest minimum, and focused instead on using its powerful cash flows to buy up truckloads of cheap stock. At 11 times trailing free cash flow, and expected to grow 22% per year over the next half-decade, this company is priced to move. In fact, I think I just might head on over to Motley Fool CAPS on Friday and rate this stock an outperformer.

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