Oshkosh Stock: Earnings Call Flags Tariff Risks

Oshkosh Corporation ((OSK)) has held its Q4 earnings call. Read on for the main highlights of the call.

Oshkosh Earnings Call Balances Solid Execution With Tariff and Cycle Risks

Oshkosh Corporation’s latest earnings call struck a cautiously optimistic tone, blending solid execution and technological progress with clear warnings about near‑term pressure from tariffs and cyclical softness in key markets. Management delivered results largely in line with guidance, highlighted strong vocational momentum and transport milestones, and reaffirmed a constructive multi‑year outlook. At the same time, they acknowledged meaningful headwinds from higher tariffs, a weaker Access market in 2026, and margin volatility tied to product mix and program ramp‑ups.

Full-Year Results Support Long-Term Targets

For fiscal 2025, Oshkosh reported revenue of $10.4 billion, adjusted operating income just over $1.0 billion and adjusted EPS of $10.79, all in line with prior guidance. These results underpin management’s confidence in its 2028 financial targets, signaling that the company is executing against its long-term plan despite macro and policy uncertainty. The performance demonstrates that Oshkosh can grow both the top and bottom line while absorbing cost inflation and program ramp costs, and it sets a solid base for the step-up envisioned in the 2026 outlook.

Q4 Growth Delivers, But Margins Tighten

Fourth-quarter consolidated sales came in at roughly $2.7 billion, up $91 million or 3.5% year-on-year, with adjusted EPS of $2.26. The company’s adjusted operating margin was 8.4%, consistent with prior guidance but 100 basis points lower than a year earlier. That decline was driven by unfavorable product mix and higher manufacturing overhead, signaling that while volume and revenue are growing, profitability is being pressured at the margin level. Investors will watch closely whether the company can recover margin as mix normalizes and cost actions take hold.

Vocational Segment Continues to Outperform

The vocational segment remained a standout. Full-year revenue exceeded $3.7 billion, up nearly 13% versus last year, and the business delivered a robust adjusted operating margin of about 15.8%, with Q4 vocational margin at 16.2%. Fire apparatus was particularly strong, with sales up around 17% and deliveries up nearly 10% in the second half compared with the prior year. A vocational backlog of more than $6.6 billion underscores sustained demand and provides visibility into future revenue. This segment is a key pillar of the company’s long-term growth and profitability story.

Transport Achieves NGDV Milestones Amid Margin Growing Pains

In the transport segment, Q4 sales reached $567 million, up $33 million year-over-year, with delivery vehicle revenue growing to $165 million and representing around 30% of segment revenue. Oshkosh passed the 5,000-vehicle production milestone for the Next Generation Delivery Vehicle (NGDV), with the fleet surpassing 10 million miles driven and deployments now in nearly all 50 states. While NGDV is still depressing margins — the transport operating margin is roughly 4%, up from 2.8% last year — the company emphasized that ramp-up and launch costs should ease over time, allowing profitability to improve from a higher revenue base.

Access Orders Rebound, But Near-Term Growth to Slow

The Access segment showed strong order momentum in the quarter, with Q4 orders exceeding $1.7 billion and a book-to-bill of 1.5, driving backlog to $1.3 billion. That backlog now sits in the three- to six‑month demand range, reflecting normalized ordering behavior and renewed customer engagement after prior over-ordering and destocking dynamics. However, the company is preparing investors for a softer year ahead in Access, with 2026 sales expected to decline mid‑single digits despite the healthier near-term demand indicators.

Showcasing Technology and Innovation at CES

Oshkosh used the CES stage to underscore its technology credentials, showcasing robotics, autonomy, AI and electrification initiatives. The company won two “Best of Innovation” awards and additional honors, including a CES Picks award for its CAMS solution. Demonstrated concepts included autonomous welding, airport robots, an autonomous jet dock and AI-powered contamination detection for refuse operations, which is slated to launch in the first quarter. These initiatives highlight Oshkosh’s push to differentiate through technology and potentially unlock higher-margin, value-added revenue streams over time.

Disciplined Capital Allocation and Strong Cash Generation

Capital returns remained a priority. Oshkosh repurchased 912,000 shares in the fourth quarter for $119 million and announced a quarterly dividend of $0.57 per share. For 2026, the company is targeting free cash flow of $550–$650 million, about 80% of expected net income, alongside continued share repurchases. Capex is planned at around $200 million, indicating a balance between returning cash to shareholders and funding growth and productivity investments. Management’s confidence in cash generation is further supported by the large vocational backlog and growing transport revenue.

Tariffs Pose a Significant 2026 Earnings Headwind

Tariffs emerged as a central theme and a sizable drag on 2026 profitability. The company estimates an incremental tariff impact of about $200 million next year, roughly $160 million higher than in 2025. In the fourth quarter alone, tariffs represented roughly $25 million of cost, around $20 million of that in the Access segment. Current guidance assumes existing tariff rates remain in force, and management acknowledged that any legal or policy shifts could require re-pricing, engineering changes or supply chain migration, injecting further uncertainty into forward profitability.

Access Segment Faces Cyclical Softness in 2026

Despite solid Q4 orders, the Access segment is expected to face weaker market conditions in 2026. Oshkosh forecasts Access sales of about $4.2 billion, down approximately 6–7% from the prior year, with an adjusted operating margin near 10%. The company expects the first quarter to be the weakest, with adjusted EPS roughly half of last year, reflecting both softer demand and a pull-forward of sales into 2025. Management believes tariff headwinds in Access can be offset by year-end through pricing and cost actions, but the segment will nonetheless act as a near-term drag on growth.

Refuse & Recycling Demand Moderates in the Near Term

Within vocational, management flagged near-term moderation in refuse and recycling vehicle demand, even as they reiterated confidence in the long-term fundamentals of this end market. Oshkosh plans to launch its AI-enabled contamination detection technology for refuse operations in the first quarter, which could support differentiation and future pricing power. For now, however, volume softness in refuse and recycling is expected to weigh on growth and margin contribution relative to the segment’s recent strong performance.

Transport Margins Held Back by Launch and Mix Costs

Transport margins remain relatively low as the company absorbs costs associated with the NGDV ramp-up, transitions away from fixed-price contracts, and navigates lower defense export volumes, including the wind-down of domestic JLTV production. Additional launch and engineering investments are weighing on profitability, keeping segment margins around 4%. Management maintains that these pressures are temporary and that transport margins should improve materially over the multi‑year horizon as NGDV matures and mix normalizes, aligning with its longer-term goal of approaching 10% margins by 2028.

Product Mix Variability Adds Noise to Vocational Margins

Even in the high-performing vocational segment, product mix remains a source of quarter-to-quarter volatility. In Q4, the company experienced adverse mix within municipal fire apparatus, including what management characterized as periodic “snowflake” orders that contribute less to margin. While these orders are a normal part of the business and support revenue and customer relationships, they can temporarily dilute margin, reminding investors that even strong segments can show choppier quarterly profitability than headline demand would suggest.

Seasonality and Timing Set Up a Back-Half Weighted Year

Management emphasized that the first half of 2026 is likely to be weaker, with performance skewed toward the back half of the year. Seasonal factors, sales pulled forward into 2025 and the time needed to offset tariffs through pricing and cost actions all contribute to this pattern. As a result, earnings and margins are expected to be more volatile early in the year, improving as NGDV ramps further, tariff offsets flow through, and the benefit of strong vocational backlog becomes more evident in the second half.

Guidance Points to Modest Growth and Stronger Second Half

Looking ahead to 2026, Oshkosh guided to consolidated sales of about $11.0 billion, representing mid‑single‑digit growth versus 2025, with adjusted operating income slightly above $1.0 billion and adjusted EPS of roughly $11.50. The outlook assumes current tariff rates remain in place, with an estimated $200 million tariff impact. By segment, management expects Access sales around $4.2 billion with roughly 10% margins, vocational sales also about $4.2 billion with margins near 17%, and transport sales of roughly $2.5 billion with margins around 4%, with NGDV representing about half of transport revenue and ramping over the year. Corporate and other costs are projected at about $180 million, with a tax rate near 24.5%, capex of approximately $200 million, and free cash flow of $550–$650 million. Oshkosh plans to maintain its dividend and share repurchases and reiterated its 2028 adjusted EPS target of $18–$22, underpinned by an expected transport margin climb toward about 10%.

In summary, Oshkosh’s earnings call painted a picture of a company executing well on its strategic priorities, driven by strong vocational performance, growing NGDV volume and notable progress in technology and innovation. Yet the path to higher earnings will not be smooth: tariff pressures, Access cycle softness, and ramp-related margin drag in transport all point to a choppy 2026, particularly in the first half. For investors willing to look through near-term volatility, management’s reaffirmed long-term targets and heavy backlog suggest a constructive multi‑year setup, but policy and macro risks remain critical variables to monitor.