Oshkosh (NYSE:OSK) Reports Strong Q4, Stock Soars

Specialty vehicles contractor Oshkosh (NYSE:OSK) reported revenue ahead of Wall Street’s expectations in Q4 CY2024, with sales up 6.3% year on year to $2.62 billion. The company’s full-year revenue guidance of $10.6 billion at the midpoint came in 3.4% above analysts’ estimates. Its non-GAAP profit of $2.58 per share was 18.2% above analysts’ consensus estimates.

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“We delivered another strong quarter as our team grew fourth quarter adjusted earnings per share to $2.58, leading to full year 2024 adjusted earnings per share of $11.74, an increase of 17.6 percent over the prior year,” said John Pfeifer, President and Chief Executive Officer of Oshkosh Corporation.

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

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.

Sales Growth

A company’s long-term sales performance signals its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Over the last five years, Oshkosh grew its sales at a tepid 5.4% compounded annual growth rate. This fell short of our benchmark 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 14% over the last two years is above its five-year trend, suggesting its demand recently accelerated.

We can better understand the company’s revenue dynamics by analyzing its backlog, or the value of its outstanding orders that have not yet been executed or delivered. Oshkosh’s backlog reached $14.25 billion in the latest quarter and averaged 7.5% 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 reported year-on-year revenue growth of 6.3%, and its $2.62 billion of revenue exceeded Wall Street’s estimates by 8.6%.

Looking ahead, sell-side analysts expect revenue to decline by 4.3% over the next 12 months, a deceleration versus the last two years. This projection doesn't excite us and suggests its products and services will see some demand headwinds.

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Operating Margin

Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.

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 2.3 percentage points over the last five years.

In Q4, Oshkosh generated an operating profit margin of 8.5%, in line with the same quarter last year. This indicates the company’s cost structure has recently been stable.

Earnings Per Share

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 8.5% 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.

Diving into Oshkosh’s quality of earnings can give us a better understanding of its performance. As we mentioned earlier, Oshkosh’s operating margin was flat this quarter but expanded by 2.3 percentage points over the last five years. On top of that, its share count shrank by 4.8%. These 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 83% was higher than its five-year trend. This acceleration made it one of the faster-growing industrials companies in recent history.

In Q4, Oshkosh reported EPS at $2.58, up from $2.57 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Oshkosh’s full-year EPS of $11.74 to shrink by 9.7%.

Key Takeaways from Oshkosh’s Q4 Results

We were impressed by how significantly Oshkosh blew past analysts’ revenue and EPS expectations this quarter. We were also glad it raised its full-year revenue and EPS guidance. Zooming out, we think this was a solid quarter. The stock traded up 7.6% to $103.01 immediately after reporting.

Indeed, Oshkosh had a rock-solid quarterly earnings result, but is this stock a good investment here? What happened in the latest quarter matters, but not as much as longer-term business quality and valuation, when deciding whether to invest in this stock. We cover that in our actionable full research report which you can read here, it’s free.