Sometimes you've got to wonder about the folks who do stock analysis and investment for a living. If you believe the reporter chatter on Oshkosh Truck (NYSE:OSK), investors were surprised to find that Oshkosh is seeing some pre-buy activity -- ahead of new emission standards for 2007 that will likely lead to a tougher 2007.
If that's true, I've got to ask these people what rock they've been sleeping under. The idea that diesel truck/engine makers were going to see a surge of orders this year and then a decline in 2007 is old hat. Paccar (NASDAQ:PCAR), Cummins (NYSE:CMI), Volvo (NASDAQ:VOLVY), Navistar (NYSE:NAV) -- all of them have talked about it to some extent or another for a little while now. So why would the diesel business at Oshkosh be any different?
Whatever the case may be, this is still a story where defense drives the bus. Revenue was up over 25% overall, but defense was again the largest contributor of absolute revenue dollars and growth. That, coupled with good operating income growth, helped outweigh a sluggish performance in fire and emergency vehicles, and a better, though small, contribution from the commercial truck business.
Looking ahead, the defense business is something of a mixed blessing. It's a great business and there's no doubt that there's plenty of present-day need for truck refurbishment and parts, but it won't last forever. It may take longer to extricate ourselves from Iraq than politicians promise, but I'm not sure I'd want to be counting on high-end growth from the defense business for an indefinite time period. And on the other hand, the commercial and fire/emergency businesses have shown themselves to be a bit volatile from one quarter or year to the next.
This is certainly a high-quality company and I'm not opposed to holding on to high-quality names even if a cyclical downswing is coming up. After all, 2007 may be rough, but there will be more pre-buys ahead of even tighter standards that will go into place in 2010. In the meantime, though, I'm also a cheapskate. While Oshkosh stock may not be overpriced, it's not enough of a bargain for a miser like me.
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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).
