Oshkosh (NYSE:OSK) investors must have a kind of love-hate relationship with the month of August.

Last month, for example, was not kind to shareholders of the Wisconsin truckmaker. Despite reporting powerful profits in its Q3 2019 earnings report at the start of the month, Oshkosh stock suffered a 22.5% decline through late August after management warned that demand for its products was "moderating." Weak free cash flow in the quarter added an additional concern.

And yet, three years ago, August was the month that saw Oshkosh win one of its most important contracts ever, a project to replace most of the U.S. Army's "Humvees" with new mine-resistant armored cars called "Joint Light Tactical Vehicles," or JLTVs for short, worth potentially $20 billion or more.

August also contained a bonus surprise for Oshkosh shareholders, which is already starting to pay off with a rebounding stock price, now up 16% off its late-August lows.

Family photo of four Oshkosh JLTV truck variants

Image source: Oshkosh Defense.

Tanks a lot for the contract, Lithuania!

On August 27, the U.S. Defense Security Cooperation Agency, the foreign military sales arm of the U.S. Pentagon, informed Congress of a request from the Lithuanian military to purchase 500 Oshkosh-built JLTVs.

Lithuania shares a border with Russia's Kaliningrad region, and has mutual defense obligations to its fellow Baltic states Latvia and Estonia, which border Russia on the east. Lithuania wants to buy the vehicles to "help improve Lithuania's light tactical vehicle fleet," which could also be called upon to help repel incursions into its neighbors to the north. 

Lithuania will pay $170.8 million for the JLTVs, assuming the sale is approved, and Oshkosh, as principal contractor on the sale, would stand to benefit. 

In an unrelated development, the same day the DSCA notified Congress of the Lithuanian arms deal, the U.S. Pentagon announced in its daily digest of contract awards that it, too, has placed an order with Oshkosh to supply JLTVs and "installed kits" for same worth $77.6 million. So in total, the end of August saw Oshkosh potentially grow its JLTV work by nearly a quarter-billion dollars -- not a bad day's work for a company that only does about $8.25 billion or so in annual sales. 

What it means to investors

Combined, these two orders promise to add about three percentage points to Oshkosh's sales growth rate over the next year or so, and perhaps even more to earnings growth. (At an operating profit margin of 12.2%, "defense" products are Oshkosh's second most profitable field of business, and significantly more profitable than the company's overall profit margin of 8.5%, according to data from S&P Global Market Intelligence.)

While I would never recommend investing in a company on the basis of just one contract win, or even two, Oshkosh stock is also trading for an attractive P/E multiple of just nine times earnings, and for a price-to-sales ratio of just 0.6 (far below the average valuation for defense companies over the last decade). Given the already attractive valuation, I'd say that these latest wins for Oshkosh's JLTV franchise are just one more good reason to be optimistic about the stock.