Oshkosh At An All-Time High Ahead Of A Cyclical Decline In Its Largest Business

I’m usually very cautious, if not outright skeptical, when I see a cyclical company trading at a high (let alone an all-time high) right as its largest business is going into cyclical decline, and yet, that’s what we have here with Oshkosh (OSK). Oshkosh is likely to dive into the teeth of a reset for its aerial work platform business next year, with three to four quarters of double-digit year-over-year declines likely ahead of a modest recovery late in 2020 or early in 2021. Defense revenue growth will offset that some, but at lower margins, and the higher-margin fire & emergency business will likely slow.

Surprised as I may be that Oshkosh hasn’t sold off ahead of the cyclical reset in AWPs, the valuation is even more surprising, as the stock doesn’t look overvalued. In fact, even with some discounts in place to reflect the cyclical risk, the shares should trade in the low $100s. While I’m concerned the shares could still sell off as the AWP declines materialize (with the risk of a weaker cycle and lower guidance), this is definitely a name I’d watch for a pullback.

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Oshkosh At An All-Time High Ahead Of A Cyclical Decline In Its Largest Business