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Why Is Oshkosh (OSK) Down 15.4% Since Last Earnings Report?

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A month has gone by since the last earnings report for Oshkosh (OSK - Free Report) . Shares have lost about 15.4% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Oshkosh due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Oshkosh's Q1 Earnings Miss, Down Y/Y

Oshkosh Corporation recorded earnings of $1.10 per share in the first quarter of fiscal 2019 (Dec 31, 2019), missing the Zacks Consensus Estimate of $1.16. The reported figure also comes in lower than the year-ago quarter’s $1.61 per share. The company’s performance was mainly impacted by lower sales volume, higher operating expenses, unfavorable product mix and production inefficiencies. Net income came in at $75.7 million, down from the year-ago quarter’s $109 million.

In the reported quarter, consolidated net sales declined 6% to $1,695 million. However, the figure surpassed the Zacks Consensus Estimate of $1,685 million.

In the fiscal first quarter, consolidated operating income plunged 32% year over to $109.1 million (6.4% of sales).

Segmental Details

Net sales in the Access equipment decreased 13.1% year over year to $717.9 million, due to lower sales volumes for both aerial work platforms, and telehandlers in North America and the Europe, Africa and the Middle East. In the reported quarter, operating income was up 3.9% to $69 million (9.6% of sales), primarily aided by favorable price/cost dynamics, solid mix, and improved operational efficiencies.

The Defense segment’s net sales increased 6.2% to $493.1 million in the quarter, owing to higher sales resulting from the continued ramp up of JLTV sales to the U.S. government. Operating income slumped 56.5% to $30.9 million (6.3% of sales) due to an unfavorable product mix, and higher new product-development spending.

Net sales in the Fire & Emergency segment declined 11.2% to $262.4 million in the fiscal first quarter. The impact of lower sales volume, higher selling, general and administrative expenses, unfavorable product mix and production inefficiencies caused the operating income to slip 22.3% to $31 million (11.8% of sales) during this period.

Net sales in the Commercial segment inched up 0.9% to $224.2 million in the reported quarter, backed by a higher mix of package sales, which include third-party chassis. The segment’s operating income decreased 4.8% to $17.8 million (7.9% of sales) in the quarter, mainly due to unfavorable product mix and higher new product-development spending.

Financial Details

Oshkosh had cash and cash equivalents of $264 million as of Dec 31, 2019. The company’s long-term debt was $819.2 million, representing a debt-to-capital ratio of 30.55%.

Oshkosh’s net cash used by operating activities was $149.9 million as of Dec 31, 2019 compared with the $85.9 million reported at the end of the year-ago period.

Share Buyback & Dividend

During the December-end quarter, the company repurchased 128,869 shares of common stock for $9.4 million.
Oshkosh’s board has announced a quarterly cash dividend of 30 cents per share for its shareholders. The amount will be paid on Feb 28, to shareholders as of Feb 14, 2020.

Fiscal 2020 Outlook

For fiscal 2020, the company reaffirmed diluted its earnings per share estimate of $7.30-$8.10. Further, net sales are projected between $7.9 billion and $8.2 billion, and operating income is expected in the band of $690-$765 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

At this time, Oshkosh has a poor Growth Score of F, however its Momentum Score is doing a lot better with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Oshkosh has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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