Deutsche Bank Rated Oshkosh Corporation as a ‘Buy’

Price movement

Oshkosh Corporation (OSK) has a market cap of $2.8 billion. It rose by 1.6% to close at $56.24 per share on September 7, 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were 3.6%, 4.8%, and 46.1%, respectively, on the same day.

OSK is trading 4.1% above its 20-day moving average, 10.0% above its 50-day moving average, and 32.3% above its 200-day moving average.

Deutsche Bank Rated Oshkosh Corporation as a ‘Buy’

Related ETFs and peers

The PowerShares Aerospace & Defense Portfolio ETF (PPA) invests 1.3% of its holdings in Oshkosh. The ETF tracks a market cap–weighted index of US-listed stocks involved in the defense, military, homeland security, and space industries. The YTD price movement of PPA was 10.6% on September 7.

The iShares Morningstar Small Value ETF (JKL) invests 0.71% of its holdings in Oshkosh. The ETF tracks a market cap–weighted index of US small-cap value stocks. The index stocks range from the 90th to the 97th percentile of the market-cap spectrum, using fundamental factors.

The market caps of Oshkosh’s competitors are as follows:

  • Terex Corporation (TEX) — $2.7 billion
  • Caterpillar (CAT) — $48.9 billion

Oshkosh’s rating

Deutsche Bank has initiated the coverage of Oshkosh Corporation with a “buy” rating and set the stock price target at $62.00 per share.

Performance in fiscal 3Q16

Oshkosh (OSK) reported fiscal 3Q16 net sales of $1.7 billion, a rise of 6.2% compared to net sales of $1.6 billion in fiscal 3Q15. Sales in its Access Equipment, Defense, and Fire and Emergency segments rose by 2.1%, 36.1%, and 24.4%, respectively. Sales in its Commercial segment fell by 2.1% in fiscal 3Q16 compared to fiscal 3Q15.

The company’s gross profit margin and operating income rose by 2.2% and 7.5%, respectively, in fiscal 3Q16 compared to fiscal 3Q15.

Its net income fell to $84.2 million in fiscal 3Q16 compared to $89.7 million in fiscal 3Q15. It reported EPS (earnings per share) of $1.13 in fiscal 3Q16 and fiscal 3Q15.

Oshkosh’s cash and cash equivalents rose by 6.1%, and its inventories fell by 3.6% in fiscal 3Q16 compared to fiscal 4Q15. Its current ratio fell to 1.6x and its DE (debt-to-equity) ratio rose to 1.5x in fiscal 3Q16. This compares to a current ratio and DE ratio of 1.7x and 1.4x, respectively, in fiscal 4Q15.

Projections

Oshkosh Corporation (OSK) made the following projections for 2016:

  • net sales of $6.0 billion–$6.1 billion
  • EPS of $2.60–$2.80
  • operating income of $340 million–$360 million
  • free cash flow of ~$400 million

These projections reflect higher sales in its Defense and Fire and Emergency segments, as well as higher operating income. Sales will be partially offset by higher corporate costs, a higher effective income tax rate, and lower access equipment segment operating income.

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