Every day, Wall Street analysts upgrade some stocks, downgrade others, and "initiate coverage" on a few more. But do these analysts even know what they're talking about? Today, we're taking one high-profile Wall Street pick and putting it under the microscope...

Oshkosh (NYSE:OSK) stock got crushed a few months ago when a superb Q3 earnings report sparked not a rally, but a sell-off instead.

Overlooking 10% quarterly sales growth and a 33% spike in profits, investors instead focused on management's comments about how demand for its products looked to be "moderating." Wall Street didn't help much, either, with analysts feuding over whether Oshkosh's good news about actual performance outweighed the bad news about what might happen next.

Result: By the time August was out, Oshkosh stock had lost nearly 16%.

Family of JLTV vehicles from Oshkosh lined up

Oshkosh makes trucks -- and these are some of its most profitable trucks. Image source: Oshkosh.

Easy go, easy come

Now, the good news is that Oshkosh has made a lot of those losses back in the succeeding months. By close of trading Friday, shares were only down about 8% from their pre-Q3-earnings high.

The better news is that at long last, Oshkosh is finally getting ready to report its Q4 numbers (on Oct. 30), which could lay to rest investor fears that the news will be as bad as everyone was worrying about back in August. Indeed, one analyst is pretty sure it won't be.

Upgrading Oshkosh

This morning, investment banker R.W. Baird announced it is upgrading Oshkosh to outperform ahead of earnings, and assigning a $101 price target (shares currently trade closer to $80).

"The current environment is the exact opposite of where we were when we downgraded" Oshkosh back in March 2018, explains Baird in a note covered by StreetInsider.com. Last quarter's warning of "declining demand" has already resulted in "meaningful multiple compression," "poor analyst and investor sentiment," and "lowered expectations" -- expectations that Baird thinks the company will now exceed.

Crucially, "OSK is well positioned to manage ... volatility" in the market for access equipment. And access equipment (such as aerial work platforms and telehandlers) is Oshkosh's flagship division, accounting for nearly half of all sales and close to 60% of profits, according to data from S&P Global Market Intelligence.

Another reason to be optimistic about Oshkosh

"'[L]ess-bad-than-feared' results" here, says Baird, "should get rewarded" when Oshkosh releases Q4 results. Additionally, just last week, TheFly.com reported that the company landed an important $159 million contract to sell "medium tactical vehicles" to Israel. And this comes on top of the news last month that Oshkosh won an even larger contract to sell Joint Light Tactical Vehicle armored trucks to Lithuania -- a deal worth $171 million.

Both of these contracts, by the way, fall within the ambit of Oshkosh's military equipment division, which is its second-most-profitable business unit, with an operating profit margin of 12.2%.

Valuing Oshkosh stock

Heading into earnings day next week, analysts aren't particularly optimistic about Oshkosh, projecting that sales will grow only 2.5% from last year's Q4, and profits will inch up less than 1%. Looking further out, predictions even call for sales to fall -- and profits, too -- in 2020.

Growth should resume in 2021 and beyond, however, according to estimates collected by S&P Global. With Oshkosh trading for less than 10 times earnings and just 0.67 times sales, this suggests that now could be a good time to buy the stock -- while expectations are muted, and Oshkosh has a chance to outperform them.

If there's one thing that still concerns me, however, it's the fact that free cash flow at Oshkosh looks decidedly weak, with just $190 million in cash profit produced over the past year, versus the $581 million in "net income" claimed on the company's income statement. To me, this is a sign that profitability at Oshkosh may not be as robust as it seems -- nor the valuation of the stock as cheap as it seems.

When earnings come out next week, I'll be focusing most intently on whether Oshkosh has begun showing a recovery in cash production -- and I'd suggest you do likewise.