Here's Why You Should Retain Oshkosh (OSK) Stock for Now

Core Viewpoint - Oshkosh Corporation (OSK) is positioned to benefit from a strong backlog, strategic acquisitions, and ongoing defense program support, despite concerns over rising capital expenditures and high ramp-up costs [1] Group 1: Backlog and Acquisitions - Oshkosh's consolidated backlog increased to $15.37 billion as of March 2024, up from $14.97 billion a year earlier, with significant contributions from Access Equipment ($3.26 billion), Defense ($6.43 billion), and Vocational ($5.68 billion) segments [2] - The acquisition of JBT's AeroTech business in August 2023 has allowed Oshkosh to enter the air transportation support market, enhancing aftermarket parts and services through a recurring revenue model [3] - The acquisition of Hinowa in January 2023 has expanded Oshkosh's manufacturing capabilities in Europe and accelerated electrification efforts, while previous acquisitions like CartSeeker Technology and a minority investment in Robotics are expected to enhance long-term growth [4] Group 2: Financial Performance and Guidance - Adjusted operating margin forecasts for Access Equipment and Vocational segments have improved, with expected margins of 16.5% and 12.75% respectively, driven by favorable sales mix and better manufacturing efficiencies [5] - Oshkosh's total debt-to-capital ratio is 0.13, significantly lower than the auto sector's 0.57, providing financial flexibility for growth opportunities [6] - The company raised its 2024 guidance, expecting adjusted operating income of approximately $1.14 billion and adjusted EPS of $11.75, an increase from previous projections [10] Group 3: Defense Segment and Market Demand - The Defense segment is entering a critical year in 2024 with the transition to the Next Generation Delivery Vehicle (NGDV) for the U.S. Postal Service, anticipating increased vehicle production through 2025 [7] - Ongoing support for various defense programs and modernization efforts are expected to drive top-line growth in the Defense segment [7] - The demand for aerial work platforms and telehandlers remains strong due to infrastructure investments and industrial onshoring initiatives, prompting Oshkosh to expand capacity across its operations [8][9] Group 4: Capital Expenditures and Challenges - Oshkosh anticipates 2024 capital expenditures to remain high at around $300 million, primarily for the NGDV facility and new product development [12] - Significant ramp-up costs associated with NGDV production are expected to impact near-term profitability, particularly in the Defense segment [12]