Oshkosh sinks after losing $7 billion JLTV recompete

Shares of military vehicle maker Oshkosh Corp. (NYSE: OSK) are plunging 12% in pre-open trading Friday after the U.S. Army announced the company had lost the $7 billion recompete contract for the Joint Light Tactical Vehicle (JLTV) to AM General.

The loss of the contract is expected to have a material impact on Oshkosh's earning power.

Bernstein analyst Chad Dillard estimates the impact to be $0.60 to EPS and $8 of equity value.

"JLTV accounts for 45% or the Defense segment's '23 revenue guidance or ~$900M," Dillard commented in a note to clients. "The target margins for the segment are high single digits, but JTLV was dilutive, so we assume ~6% margins. After tax impact, we end up at a 60c hit to EPS. Applying a 14x mid-cycle multiple gets us to an $8/share hit to equity value, assuming the market did not discount such an outcome..."

Oshkosh will have 10 days to enter a protest, with the analyst noting that historically protests have had only a 10% success rate.

The analyst sees shares falling 7% on the open. So far, they are down more than that.

By StreetInsider.com Staff

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