Oshkosh (OSK)

Specialty vehicles contractor Oshkosh (NYSE:OSK) missed Wall Street’s revenue expectations in Q1 CY2025, with sales falling 9.1% year on year to $2.31 billion. Its non-GAAP profit of $1.92 per share was 5.8% below analysts’ consensus estimates.

Company Overview

Oshkosh (NYSE:OSK) manufactures specialty vehicles for the defense, fire, emergency, and commercial industry, operating various brand subsidiaries within each industry.

Heavy transportation equipment companies are investing in automated vehicles that increase efficiencies and connected machinery that collects actionable data. Some are also developing electric vehicles and mobility solutions to address customers’ concerns about carbon emissions, creating new sales opportunities. Additionally, they are increasingly offering automated equipment that increases efficiencies and connected machinery that collects actionable data. On the other hand, heavy transportation equipment companies are at the whim of economic cycles. Interest rates, for example, can greatly impact the construction and transport volumes that drive demand for these companies’ offerings.

Competitors of Oshkosh include Lockheed Martin (NYSE:LMT), Rev (NYSE:REVG), and Terex (NYSE:TEX).

A company’s long-term sales performance can indicate its overall quality. Any business can have short-term success, but a top-tier one grows for years. Regrettably, Oshkosh’s sales grew at a tepid 5.4% compounded annual growth rate over the last five years. This was below our standard for the industrials sector and is a tough starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Oshkosh’s annualized revenue growth of 10.6% over the last two years is above its five-year trend, suggesting its demand recently accelerated. Oshkosh recent performance stands out, especially when considering many similar Heavy Transportation Equipment businesses faced declining sales because of cyclical headwinds.

Oshkosh also reports its backlog, or the value of its outstanding orders that have not yet been executed or delivered. Oshkosh’s backlog reached $14.62 billion in the latest quarter and averaged 4% year-on-year growth over the last two years. Because this number is lower than its revenue growth, we can see the company fulfilled orders at a faster rate than it added new orders to the backlog. This implies Oshkosh was operating efficiently but raises questions about the health of its sales pipeline.

This quarter, Oshkosh missed Wall Street’s estimates and reported a rather uninspiring 9.1% year-on-year revenue decline, generating $2.31 billion of revenue.

Looking ahead, sell-side analysts expect revenue to grow 1.2% over the next 12 months, a deceleration versus the last two years. This projection is underwhelming and implies its products and services will see some demand headwinds.

Oshkosh has bad unit economics for an industrials business, signaling it operates in a competitive market. As you can see below, it averaged a 16.1% gross margin over the last five years. Said differently, Oshkosh had to pay a chunky $83.87 to its suppliers for every $100 in revenue.

In Q1, Oshkosh produced a 17.3% gross profit margin, down 1.2 percentage points year on year. On a wider time horizon, the company’s full-year margin has remained steady over the past four quarters, suggesting its input costs (such as raw materials and manufacturing expenses) have been stable and it isn’t under pressure to lower prices.

Operating margin is one of the best measures of profitability because it tells us how much money a company takes home after procuring and manufacturing its products, marketing and selling those products, and most importantly, keeping them relevant through research and development.

Oshkosh was profitable over the last five years but held back by its large cost base. Its average operating margin of 7.4% was weak for an industrials business. This result isn’t too surprising given its low gross margin as a starting point.

On the plus side, Oshkosh’s operating margin rose by 1.7 percentage points over the last five years, as its sales growth gave it operating leverage.

In Q1, Oshkosh generated an operating profit margin of 7.6%, down 2.6 percentage points year on year. Since Oshkosh’s operating margin decreased more than its gross margin, we can assume it was less efficient because expenses such as marketing, R&D, and administrative overhead increased.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Oshkosh’s EPS grew at a decent 8.2% compounded annual growth rate over the last five years, higher than its 5.4% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

We can take a deeper look into Oshkosh’s earnings quality to better understand the drivers of its performance. As we mentioned earlier, Oshkosh’s operating margin declined this quarter but expanded by 1.7 percentage points over the last five years. Its share count also shrank by 5.5%, and these factors together are positive signs for shareholders because improving profitability and share buybacks turbocharge EPS growth relative to revenue growth.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For Oshkosh, its two-year annual EPS growth of 48.7% was higher than its five-year trend. This acceleration made it one of the faster-growing industrials companies in recent history.

In Q1, Oshkosh reported EPS at $1.92, down from $2.89 in the same quarter last year. This print missed analysts’ estimates, but we care more about long-term EPS growth than short-term movements. Over the next 12 months, Wall Street expects Oshkosh’s full-year EPS of $10.77 to stay about the same.

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

Oshkosh has shown weak cash profitability over the last five years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 3.4%, subpar for an industrials business.

Taking a step back, we can see that Oshkosh’s margin dropped by 9.9 percentage points during that time. It may have ticked higher more recently, but shareholders are likely hoping for its margin to at least revert to its historical level. Almost any movement in the wrong direction is undesirable because of its relatively low cash conversion. If the longer-term trend returns, it could signal it’s becoming a more capital-intensive business.

Oshkosh burned through $435.2 million of cash in Q1, equivalent to a negative 18.8% margin. The company’s cash burn slowed from $455.9 million of lost cash in the same quarter last year. These numbers deviate from its longer-term margin, indicating it is a seasonal business that must build up inventory during certain quarters.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Although Oshkosh hasn’t been the highest-quality company lately, it historically found a few growth initiatives that worked. Its five-year average ROIC was 13.3%, higher than most industrials businesses.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Fortunately, Oshkosh’s ROIC averaged 2.5 percentage point increases over the last few years. This is a good sign, and we hope the company can keep improving.

Oshkosh reported $210.3 million of cash and $1.48 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $1.24 billion of EBITDA over the last 12 months, we view Oshkosh’s 1.0× net-debt-to-EBITDA ratio as safe. We also see its $66.1 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

We were impressed by how significantly Oshkosh blew past analysts’ backlog expectations this quarter. On the other hand, its revenue missed significantly and its EBITDA fell short of Wall Street’s estimates. Overall, this quarter could have been better. The stock traded down 2.6% to $86 immediately following the results.

Updated: May 22, 2025 at 10:52 PM EDT

When considering an investment in Oshkosh, investors should account for its valuation and business qualities as well as what’s happened in the latest quarter.

Oshkosh isn’t a terrible business, but it isn’t one of our picks. For starters, its revenue growth was uninspiring over the last five years, and analysts expect its demand to deteriorate over the next 12 months. And while its expanding operating margin shows the business has become more efficient, the downside is its cash profitability fell over the last five years. On top of that, its low gross margins indicate some combination of competitive pressures and high production costs.

Oshkosh’s P/E ratio based on the next 12 months is 9.1x. While this valuation is optically cheap, the potential downside is big given its shaky fundamentals. We're pretty confident there are more exciting stocks to buy at the moment.

Wall Street analysts have a consensus one-year price target of $108.09 on the company (compared to the current share price of $98.43).

Want to invest in a High Quality big tech company? We’d point you in the direction of Microsoft and Google, which have durable competitive moats and strong fundamentals, factors that are large determinants of long-term market outperformance.

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