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Specialty vehicles contractor Oshkosh (NYSE:OSK) announced better-than-expected results in Q2 CY2024, with revenue up 18% year on year to $2.85 billion. It made a non-GAAP profit of $3.34 per share, improving from its profit of $2.74 per share in the same quarter last year.
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Oshkosh (OSK) Q2 CY2024 Highlights:
- Revenue: $2.85 billion vs analyst estimates of $2.78 billion (2.5% beat)
- EPS (non-GAAP): $3.34 vs analyst estimates of $3.01 (11% beat)
- EPS (non-GAAP) Guidance for the full year is $11.75 at the midpoint, beating analysts' estimates by 4.2%
- Gross Margin (GAAP): 19.2%, up from 17.6% in the same quarter last year
- Free Cash Flow was -$250.5 million compared to -$455.9 million in the previous quarter
- Backlog: $15.37 billion at quarter end, up 2.7% year on year
- Market Capitalization: $7.48 billion
Oshkosh (NYSE:OSK) manufactures specialty vehicles for the defense, fire, emergency, and commercial industry, operating various brand subsidiaries within each industry.
Heavy Transportation EquipmentHeavy transportation equipment companies are investing in automated vehicles that increase efficiencies and connected machinery that collects actionable data. Some are also developing electric vehicles and mobility solutions to address customers’ concerns about carbon emissions, creating new sales opportunities. Additionally, they are increasingly offering automated equipment that increases efficiencies and connected machinery that collects actionable data. On the other hand, heavy transportation equipment companies are at the whim of economic cycles. Interest rates, for example, can greatly impact the construction and transport volumes that drive demand for these companies’ offerings.
Sales GrowthExamining a company's long-term performance can provide clues about its business quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Regrettably, Oshkosh's sales grew at a weak 3.8% compounded annual growth rate over the last five years. This shows it failed to expand in any major way and is a rough starting point for our analysis.
Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. Oshkosh's annualized revenue growth of 14.8% over the last two years is above its five-year trend, suggesting its demand recently accelerated.
Oshkosh also reports its backlog, or the value of its outstanding orders that have not yet been executed or delivered. Oshkosh's backlog reached $15.37 billion in the latest quarter and averaged 24.7% year-on-year growth over the last two years. Because this number is better than its revenue growth, we can see the company accumulated more orders than it could fulfill and deferred revenue to the future. This could imply elevated demand for Oshkosh's products and services but raises concerns about capacity constraints.
This quarter, Oshkosh reported robust year-on-year revenue growth of 18%, and its $2.85 billion of revenue exceeded Wall Street's estimates by 2.5%. Looking ahead, Wall Street expects sales to grow 2.9% over the next 12 months, a deceleration from this quarter.
Operating MarginOperating margin is one of the best measures of profitability because it tells us how much money a company takes home after procuring and manufacturing its products, marketing and selling them, and, most importantly, keeping them relevant through research and development.
Oshkosh was profitable over the last five years but held back by its large expense base. It demonstrated mediocre profitability for an industrials business, producing an average operating margin of 7.3%. This result isn't too surprising given its low gross margin as a starting point.
On the bright side, Oshkosh's annual operating margin rose by 1.7 percentage points over the last five years
In Q2, Oshkosh generated an operating profit margin of 9.2%, in line with the same quarter last year. This indicates the company's cost structure has recently been stable.
EPSAnalyzing long-term revenue trends tells us about a company's historical growth, but the long-term change in its earnings per share (EPS) points to the profitability of that growth–for example, a company could inflate its sales through excessive spending on advertising and promotions.
Oshkosh's EPS grew at an unimpressive 6.8% compounded annual growth rate over the last five years. On the bright side, this performance was better than its 3.8% annualized revenue growth and tells us the company became more profitable as it expanded.
Diving into the nuances of Oshkosh's earnings can give us a better understanding of its performance. As we mentioned earlier, Oshkosh's operating margin was flat this quarter but expanded by 1.7 percentage points over the last five years. On top of that, its share count shrank by 6.4%. These are positive signs for shareholders because improving profitability and share buybacks turbocharge EPS growth relative to revenue growth.
Like with revenue, we also analyze EPS over a more recent period because it can give insight into an emerging theme or development for the business. For Oshkosh, its two-year annual EPS growth of 118% was higher than its five-year trend. This acceleration made it one of the faster-growing industrials companies in recent history.
In Q2, Oshkosh reported EPS at $3.34, up from $2.74 in the same quarter last year. This print easily cleared analysts' estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Oshkosh to perform poorly. Analysts are projecting its EPS of $11.84 in the last year to shrink by 4.6% to $11.29.
Key Takeaways from Oshkosh's Q2 ResultsWe enjoyed seeing Oshkosh exceed analysts' revenue expectations this quarter. We were also excited its EPS outperformed Wall Street's estimates. Overall, we think this was a really good quarter that should please shareholders. Investors were likely expecting more, however, and the stock traded down 2% to $111.99 immediately after reporting.
