The annoying thing about expectations is that they so often set a company up for failure. After all, if everybody expects you to get a certain piece of business, the downside to a delay or cancellation is much bigger than the upside to a win. Be that as it may, Oshkosh Truck (NYSE:OSK) announced that it had secured a sizable contract from the U.S. Navy for new vehicles for the Marine Corps.
Under the terms of the six-year deal, Oshkosh will manufacture so-called Logistics Vehicle System Replacement trucks to replace old LVS trucks in service (which were also manufactured by Oshkosh). Although the contract has a fixed price for the vehicles, the total quantity of trucks to be delivered and the timing of those deliveries are indefinite. Nevertheless, the company estimated a production quantity of nearly 1,600 vehicles, which would make the deal worth over $740 million.
Now, I'm not sure simple mathematical extrapolation is valid here. But if it is, and the Marines order the maximum number of vehicles allowed (1,900), the deal could be worth close to $900 million in total.
Of course, that's not all that has been going on with Oshkosh. The company tried to block Armor Holdings (NYSE:AH) from buying Stewart & Stevenson, alleging that the latter company's board unfairly rejected a better bid from Oshkosh. Nevertheless, the deal was closed last Thursday, so there's not much left that Oshkosh can do.
This truck contract win is certainly a positive, even if it was generally expected. But it's also important to keep it in perspective -- this company generated more than $3 billion in revenue over the past 12 months. And while Oshkosh is indeed a fine competitor in the military truck business, better results in the fire/rescue and commercial segments are also important if this stock is to continue moving up over the long haul.
For more related Foolishness:
- Missing the Obvious on Oshkosh
- Ceradyne Tough to Crack: Fool by Numbers
- Foolish Forecast: Armor Buy, Sell, or Holdings
Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).
