KeyBanc Upgrades Oshkosh Corporation (OSK) to Buy; Contract Win a Game-Changer

July 6, 2009 7:28 AM EDT

KeyBanc upgrades Oshkosh Corporation (NYSE: OSK) from Hold to Buy. Price target $30.

KeyBanc analyst says, "In our view, OSK's successful bid for the MRAP-ATV contract is a game changer for the Company with respect to near-term earnings visibility, cash generation, and debt reduction. OSK was awarded a $1.1 billion contract for 2,244 vehicles last week (implying per unit revenue of ~$470,000), and we believe the M-ATV program will grow to 5,244 units, generating revenue in a range of $2.3 billion-$2.5 billion. While OSK may subcontract part of the program, we expect the Company will produce the lion's share of these vehicles in-house at an operating margin in the 10-12% range, with delivery starting this month. At the aforementioned operating margin, we believe this contract could generate $2.05-$2.60 in earnings (before potential subcontracting), all of which is likely to hit OSK's income statement before the end of FY10. Additionally, we anticipate OSK should be able to secure most or all of the aftermarket component of the program. We estimate aftermarket revenue could run into the hundreds of millions of dollars over several years, potentially at a mid-teen operating margin...We are increasing our FY09 estimate to a loss of $0.47 from a loss of $0.61, increasing our FY10 estimate to $3.25 from $1.24 and introducing an FY11 estimate of $2.08."

To see more analyst ratings on OSK Click Here.

Oshkosh Corp. is a designer, manufacturer and marketer of a range of specialty vehicles and vehicle bodies. The Company operates in four segments: access equipment, defense, fire & emergency, and commercial.

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