Mover: Oshkosh

Shares of Oshkosh Corp. continued to surge Wednesday morning, a day after the specialty vehicle maker beat out three rival teams for an Army order of 2,244 bomb-resistant vehicles to outfit ground forces in Afghanistan.

The Oshkosh, Wis., company pulled out the win over its larger rival Navistar, as well as BAE Systems and Force Dynamics, a joint venture between Force Protection Inc. and General Dynamics Corp.

Steve Barger of KeyBanc Capital Markets said the all-terrain vehicle contract is "clearly a positive for the stock" and should spur a further rally as investors digest the deal, near-term earnings prospects, likely improvement in liquidity and debt paydown prospects. "We anticipate significant upside in the name Wednesday," Barger said.

In Wednesday morning trading, Oshkosh shares jumped $3.69, or 25 percent, to $18.23, while Navistar fell 31 cents to $43.29 and Force Protection tumbled $3.08, or 35 percent, to $5.76. The pact was announced after the markets closed on Tuesday.

Stephen Volkmann of Jefferies & Co. Inc. said Oshkosh's win is a loss for Navistar and the Warrenville, Ill., company's focus should now be "back to the basics" in truck markets. Volkmann said Navistar's low stock value and a potential recovery in truck markets put the company in a good position.

Barger said that if Oshkosh manufactures all the vehicles rather than subcontracts elements of the program at an operating margin of between 10 percent and 12 percent, the Pentagon contract could contribute 90 cents per share to $1.10 per share before the end of the company's fiscal 2010.

He did not revise his profit estimates for Oshkosh, saying he was waiting for more details on vehicle delivery or if Oshkosh ultimately uses subcontractors. He estimates the company will post a loss of 61 cents per share this year and will earn $1.24 for 2010.

Analysts surveyed by Thomson Reuters expect Oshkosh to post a loss of 61 cents per share for 2009 and earn 90 cents per share next year.

The program could ultimately grow to at least 5,000 vehicles, Barger said. However, if this occurred, he is not certain if Oshkosh would be the prime contractor or if the Defense Department would instead turn to other Pentagon contractors, such as BAE, Force Dynamics and Navistar.

The Defense Department has previously said it could buy between 2,080 and 10,000 of the so-called MRAP-All Terrain Vehicles for use by the Army and Marine Corps.

The military has said it needs a hybrid armored vehicle to provide the same type of protection as mine-resistant, ambush-protected vehicles that have been used in Iraq. But it must be far more agile, lighter and provide increased maneuverability to handle Afghanistan's rocky terrain.

Because of the urgent demand by the Pentagon for these vehicles, Oshkosh said it began daily production on its manufacturing line a few weeks ago.

"We and our suppliers have already made significant investments in materials and are well positioned to accelerate our manufacturing capabilities," said Andy Hove, Oshkosh executive vice president and president of the company's defense unit, in a statement Tuesday.