Let's review the numbers. In its fiscal third quarter 2013, Oshkosh reported:
- Sales growth of 2%, to $2.2 billion
- Significant gains in operating profit margin, which expanded 440 basis points to 10.2%
- Earnings of $1.67 per diluted share -- nearly twice what it earned a year ago
- Significant improvement in cash production, with free cash flow now tipping the scales at $222.3 million for the past three quarters of this fiscal year -- a 450% improvement over where Oshkosh was at, this time, last year.
That all sounds very good for Oshkosh. Now let's talk about the bad news.
What goes up ...
On the divisional level, the company noted that its Access Equipment division, which makes aerial work platforms, lifts, trailers, telehanders, and similar equipment -- grew its sales more than 15% in the quarter, and added about 560 basis points worth of operating profits margin -- "lifting" operating profits 75%. That was essentially "it" for the good news, however.
Sales of commercial vehicles (such as cement mixers), although up 10%, produced no additional profit for Oshkosh. Rather, profit margins plummeted, and operating profits were down 18%. Likewise, sales of fire and emergency vehicles declined 11%, leading to a 19% decrease in operating profit.
Profits from Oshkosh's defense division, which makes, for example, M-ATV "all-terrain" MRAP armored trucks, ballooned to $86 million. But sales in the segment were down 8% on lower defense spending. This continues a trend we've seen elsewhere in the defense sector, where sales slipped at General Dynamics and Lockheed Martin, for example, while increasing only slightly at Northrop Grumman. So what saved Oshkosh from suffering a similar fate, it would appear, is the same thing that helped Boeing grow its sales 9% in the most recent quarter -- having a strong civilian business to offset weak defense spending.
... might come down
That said, before you get too excited about Oshkosh's chances for repeating this feat, beware: Deep within its earnings release, Oshkosh revealed that backlog of work remaining to be done at the company is down 32% from where things stood a year ago. With $3.2 billion in backlogged orders, the company still has about five months' worth of revenues "in the bag." It's what happens after those five months that should worry you.