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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