Here's Why Oshkosh Gained 22.4% in January

The company made its case that investor fears over a global slowdown are overstated.

Lou Whiteman
Lou Whiteman
Feb 4, 2019 at 2:48PM
Industrials

What happened

Shares of Oshkosh Corp. (NYSE:OSK) jumped 22.4% in January, according to data provided by S&P Global Market Intelligence, after a strong earnings report and guidance that analysts say could prove to be conservative. It was a nice turnaround for a stock that has been an underperformer for most of the last year.

So what

The heavy-vehicle manufacturer reported fiscal-first-quarter adjusted earnings per share of $1.61, easily beating the $0.96-per-share consensus, on higher-than-expected revenue. The company also raised its fiscal 2019 guidance to earnings of $7.00 to $7.50 per share on $8.05 billion to $8.25 billion in revenue, up from previous guidance of $6.50 to $7.25 per share in earnings and sales of $7.85 billion to $8.15 billion.

The company also deployed its cash, repurchasing $170 million worth of its stock in the recently completed quarter.

Oshkosh's Joint Light Tactical Vehicle in the snow.

Oshkosh won a big order for its Joint Light Tactical Vehicle. Image source: Oshkosh.

CEO Wilson R. Jones told investors on a conference call that the results "reflected solid demand and strong customer metrics" led by the company's access equipment and fire and emergency units. Oshkosh also received a $1.7 billion tactical vehicle order from the U.S. Army during the quarter.

Check out all our earnings call transcripts.

The strong results got the attention of the analyst community, with at least one analyst upgrading Oshkosh to a "buy" and another upping their price target on the stock.


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Now what

While the quarter was strong, it was likely the company's outlook that really excited investors. Even after the January jump, shares are still down more than 14% over the past year, as Oshkosh and other machinery companies have fallen victim to concerns that rising interest rates would stunt U.S. growth at the same time international growth is fading.

On the call, Jones did his best to calm investor nerves, giving no indication that he sees a recession on the horizon.

Feedback from our customers regarding their businesses remains upbeat, in contrast to some of the stock market headlines and the predicted direction of the economy. This positive customer sentiment drives our increased outlook for 2019. An outlook that is supported by our expectations for continued favorable end-market demand, healthy backlogs across all four segments and an engaging and improving culture across the company is motivating and energizing our team members.

Oshkosh shares are cheap, trading at just 10.54 times earnings, and the company's optimistic outlook and strong order volume in the quarter provide hope that the earnings momentum can continue for the rest of the year and into 2020.

Barring a recession, Oshkosh shares look attractive right now.