Oshkosh Corp (OSK): Defense Contracts and Margin Recovery Fuel Growth

The military and commercial vehicle manufacturer Oshkosh Corp (OSK) is emerging as a compelling investment opportunity amid a confluence of tailwinds: renewed defense contracts, margin improvements, and institutional investor confidence. With Goldman Sachs recently upgrading the stock to Buy and analysts forecasting upside potential, OSK's strategic advantages and near-term catalysts position it to outperform in both defense and commercial markets.

Defense Contracts: A Steady Revenue Backlog

Oshkosh's defense segment has been a key driver of its recent momentum. In June 2025, the U.S. Army awarded a $792 million contract extension for its Medium Tactical Vehicles (FMTV A2), extending the program through February 2029. This follows a $14.6 billion backlog as of March 2025, with multi-year defense contracts accounting for roughly 50% of near-term revenue growth. The Netherlands Ministry of Defense also added 150 Expeditionary Patrol Vehicles to its fleet, signaling expanding international demand.

These wins are critical because they provide visibility and stability. Analysts at JPMorgan and Citi noted that the FMTV extension alone could boost margins, as long-term contracts allow Oshkosh to optimize production and reduce costs over time.

Margin Recovery: From Transportation to Tech

Oshkosh's Transportation segment—which includes commercial trucks and access equipment—has seen margin improvements, driven by a combination of strategic pricing and operational efficiency. Goldman Sachs analyst Jerry Revich highlighted that declining construction equipment capital stock is pushing up used equipment values, creating a “sweet spot” for Oshkosh's aftermarket sales.

The company is also leveraging AI-driven autonomous technologies to cut costs and improve production. By 2028, Oshkosh aims to achieve 12–14% operating margins, up from 8.5% in 2022, through new contracts, product launches, and free cash flow conversion of 90%+. This focus on profitability is reflected in its 2028 guidance: $13–14 billion in revenue and $18–22 adjusted EPS, implying a 24% compound annual growth rate (CAGR) for earnings.

Institutional Confidence and Analyst Optimism

The stock's 21.3% YTD return in 2025 has drawn 92.36% institutional ownership, with firms like BlackRock and Vanguard taking stakes. While retail sentiment on platforms like Stocktwits remains bearish, institutional buyers are undeterred by near-term macro risks.

Analyst ratings reflect cautious optimism. The “Moderate Buy” consensus from 13 analysts includes 7 Buy/Hold equivalents, with price targets ranging from $91 (BofA) to $169 (Baird). Goldman's $131 target—up from $124—reflects confidence in margin expansion and execution. Analysts at Jefferies and Citi emphasized Oshkosh's ability to “beat across the board” in its segments, particularly defense and vocational vehicles.

Risks and the Case for Caution

No stock is without risks. Oshkosh faces tariff exposure, currency fluctuations, and execution challenges in its international expansion plans. BofA Securities, for instance, downgraded the stock to Sell due to macroeconomic concerns. Additionally, the Access Equipment division—which lags in recovery—requires a rebound in construction spending to meet growth targets.

Why Buy Now?

Despite these risks, OSK's defensive exposure and margin trajectory make it a resilient play in an uncertain market. The $14.6 billion backlog and multi-year defense contracts provide a “moat” against cyclical downturns, while margin improvements and autonomous tech investments position the company for secular growth.

The $131 Goldman Sachs price target—still above current levels—suggests 3% upside, but the $169 Baird target implies 49% potential. Even skeptics like BofA acknowledge the 2028 targets are “encouraging,” if aggressive.

Final Analysis: A Convincing Buy at Current Levels

Oshkosh Corp is a strategic buy for investors seeking exposure to defense spending and industrial recovery. Its robust backlog, margin expansion roadmap, and institutional support justify a “Moderate Buy” rating. While risks exist, the company's focus on free cash flow, disciplined capital allocation, and high-margin defense contracts make it a defensive yet growth-oriented stock.

For income-focused investors, the 1.2% dividend yield adds to its appeal. Meanwhile, the $18–22 EPS target by 2028—if achieved—could redefine OSK's valuation. With shares trading near $113 as of June 2025, the upside potential outweighs near-term headwinds.

Bottom Line: Oshkosh's combination of steady defense wins, margin recovery, and institutional backing makes it a compelling investment. For those willing to look past short-term noise, OSK offers a solid entry point to capitalize on its long-term growth story.