Monday, August 3, 2015

Seeking Alpha: Oshkosh Getting Squashed

I was nervous about Oshkosh (NYSE:OSK) back in January, as I thought there wasn't enough upside in my base-case assumptions to offset the significant risk and uncertainty. As it turns out, construction and energy demand have been even weaker than expected at the start of the year, and there are signs and warnings from companies like Eaton (NYSE:ETN) and Parker-Hannifin (NYSE:PH) that overall mobile equipment demand is not looking very good.

Down almost 20% from the time of that January piece, the investment case for Oshkosh is still broadly what it was before - buy Oshkosh if you expect a sharper recovery in oil/gas and solid growth in construction equipment demand, coupled with Oshkosh winning a major defense vehicle award. While my fair value hasn't gone down too much (I had generally more bearish than average expectations earlier this year), I still have elevated concerns about this business and I think there are safer risk/reward trade-offs out there. All of that said, there's definitely room for self-improvement here and a defense vehicle win could conceivably add as much as $10 per share.

Read more here:
Oshkosh Getting Squashed

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