Solid Segment Backlogs Aid Oshkosh (OSK) Amid High Costs

 | Aug 06, 2019 08:16AM ET

On Aug 5, we issued an updated research report on Oshkosh Corporation (NYSE:OSK) .

The WI-based company manufactures, designs and supplies diverse range of vehicle bodies and specialty vehicles.

Improved product pricing along with higher sales volume is driving the access equipment segment. This offsets higher material costs and generates sales. The segment’s revenues rose 7.7% year over year to $1.25 billion in the third quarter of fiscal 2019.

Oshkosh is supported by robust backlog, diverse end-markets and integrated operations across all segments. This prompted the company to raise guidance for the current fiscal. Presently, the company expects adjusted earnings per share in the range of $7.90-$8.10. Further, consolidated operating income is projected in the range of $760-$775 million, up from the earlier view of $725-$755 million.

Additionally, the company paid out dividends in almost every quarter and engages in share buyback programs to boost shareholders’ value. The quarterly dividend payout was increased by 12.5% to 27 cents in November 2018 and it has remained unchanged since then. During fiscal third quarter, the company repurchased 1,166,914 shares of common stock for $88.9 million.

However, higher raw material and freight costs as well as fluctuations in foreign currency are increasing overall expenses. Oshkosh has implemented steel and aluminum surcharges to partly offset impact of higher costs.

Further, extreme climate conditions, labor challenges and uncertain trade policies are headwinds to the company. Unexpected weather conditions played a key role in operating income decline of the commercial segment. The dependence on the U.S. government for the defense segment’s sales is also a threat to the company. Oshkosh’s failure to add foreign militaries as customers within the segment will lead to sales decline in the upcoming quarters.

In the past year, Oshkosh has outperformed the industry it belongs to. Shares of the company have inched up 0.1% against the industry’s decline of 22.2%.