Oshkosh Corporation ((OSK)) has held its Q1 earnings call. Read on for the main highlights of the call.
Oshkosh Corporation’s recent earnings call painted a mixed picture of the company’s financial health. While there was a strong performance in the Vocational and Access segments, challenges remain, particularly with tariffs impacting earnings and a decline in consolidated sales. The Defense segment also faced issues, but the company showed resilience with successful strategies to mitigate some of these challenges.
Strong Performance in Vocational and Access Segments
The earnings call highlighted Oshkosh Corporation’s impressive performance in its Vocational and Access segments. The Vocational segment achieved a robust adjusted operating income margin of nearly 15%, while the Access segment maintained a resilient adjusted operating margin of 11.3%, despite facing lower sales. This performance underscores the company’s ability to maintain profitability in key areas.
Revenue Growth in Vocational Segment
Oshkosh Corporation’s Vocational segment experienced significant year-over-year revenue growth of 12%. This growth was primarily driven by increased sales of refuse and recycling vehicles, coupled with strong price realization. This positive trend highlights the segment’s potential for continued expansion and revenue generation.
Solid Backlog and New Orders
The company reported a solid backlog, with $1.8 billion in the Access segment and $6.3 billion in the Vocational segment. Noteworthy orders include a multi-year contract for 22 conventional Pierce fire trucks for the City of Calgary, indicating strong demand and future revenue visibility.
Successful Tariff Mitigation Strategy
Oshkosh Corporation successfully mitigated the impact of European tariffs by localizing production of booms at the Hinowa facility in Italy. This strategic move, which involved shifting production from China to Italy in less than a year, demonstrates the company’s agility in navigating international trade challenges.
Tariff Impact on Earnings
Despite successful mitigation efforts, the company anticipates a $1 EPS impact from tariffs, primarily affecting the Access segment. This highlights the ongoing challenges posed by international trade policies and their potential impact on the company’s financial performance.
Decline in Consolidated Sales
The first quarter saw a decline in consolidated sales, with a total of $2.3 billion, marking a decrease of $231 million or 9% from the previous year. This decline reflects softer market conditions for Access equipment in North America, posing a challenge for the company moving forward.
Defense Segment Challenges
The Defense segment faced difficulties with lower volume and higher cumulative catch-up adjustments, resulting in a breakeven performance for the quarter. These challenges highlight the need for strategic adjustments to improve performance in this segment.
Free Cash Flow and Debt
Oshkosh Corporation reported a net use of cash of $435 million in free cash flow due to seasonal working capital needs. To bolster liquidity, the company entered into a new $500 million 24-month term loan, ensuring financial flexibility to navigate future challenges.
Forward-Looking Guidance
Looking ahead, Oshkosh Corporation reaffirmed its full-year adjusted EPS guidance of $11, despite potential headwinds from recent tariff announcements. The company estimates a direct impact of about $1 per share, which could be mitigated by up to $0.50 through cost actions. The Defense segment is expected to ramp up NGDV production to full rate by year-end, promising strong revenue growth in the latter half of 2025 and into 2026. The solid backlog in the Access and Vocational segments provides significant visibility for future revenue.
In summary, Oshkosh Corporation’s earnings call revealed a company navigating both successes and challenges. While strong performances in the Vocational and Access segments are promising, issues such as tariff impacts and a decline in consolidated sales present hurdles. However, with strategic mitigation efforts and a solid backlog, the company remains poised for future growth.