Oshkosh Corporation: Navigating Tariff Turbulence with Segment-Specific Strength

Amid escalating global trade tensions, Oshkosh Corporation (OSK) has emerged as a resilient industrial player, leveraging its diversified portfolio and strategic adaptations to offset tariff-related headwinds. While the company’s Q1 2025 results revealed uneven performance across segments, its high-margin Vocational division—bolstered by pricing power and electrification—has positioned OSK as a contrarian opportunity for investors seeking stability in an uncertain market.

The Divergent Performance Playbook

Oshkosh’s three segments—Vocational, Access, and Defense—offer a microcosm of its ability to thrive in adversity.

Vocational: The Engine of Resilience

The Vocational segment, which builds refuse, recycling, and fire trucks, delivered 12.2% revenue growth to $866.8 million in Q1, driven by strong pricing and demand for specialty vehicles. Operating margins expanded to 13.6%, with adjusted margins hitting 14.9%, reflecting disciplined cost controls and a focus on high-margin electric models like the Pierce Volterra fire truck.

A $6.3 billion backlog underscores the segment’s long-term visibility, while its 4–5% CAGR outlook through 2030 aligns with urbanization trends and stricter waste management regulations. Strategic moves like expanding production capacity and advancing technologies such as the Collision Avoidance Mitigation System (CAMS) further solidify its lead.

Access: Tariff-Driven Struggles, Strategic Shifts

The Access segment—which includes aerial work platforms and AUSA construction equipment—suffered a 22.7% revenue decline to $957.1 million, hit by EU tariffs on Chinese imports and pricing competition. Operating margins collapsed to 10.8%, but management is fighting back. By relocating production to Italy to bypass EU tariffs and launching cost-reducing innovations like ClearSky Smart Fleet technology, Oshkosh aims to stabilize the segment. A micro-sized scissor lift launch could also reinvigorate North American sales.

Defense: Transition Pains, Long-Term Gains

The Defense division’s revenue fell 9.1% as the JLTV program winds down, but new opportunities loom. The Next Generation Delivery Vehicle (NGDV) for the U.S. Postal Service is on track for full-rate production by late 2025, and bids for the Army’s $2.8 billion Mobile Protected Firepower (MPF) program could provide a lifeline. Despite a 95.5% plunge in operating income, Oshkosh’s focus on autonomy-ready vehicles like the PLS A2 and securing Dutch JLTV orders signals a path to recovery.

Management’s Play to Offset Tariff Damage

CEO John Pfeifer framed the $1.00 per share tariff impact as a temporary hurdle, with $0.50 mitigated via cost cuts and operational efficiencies. The company’s $600 million liquidity buffer supports strategic investments, while a 10% dividend hike to $0.51/share and $28.7 million in Q1 buybacks underscore confidence in its long-term model.

Despite near-term headwinds, OSK’s valuation at ~12.5x 2025E adjusted EPS remains reasonable, offering a 1.3% dividend yield as a cushion.

Why OSK is a Contrarian Buy

1. Segment Diversification: The Vocational segment’s strength offsets weaker divisions, providing a safety net in volatile markets.
2. Electrification and Innovation: EV adoption in refuse/recycling and advanced safety tech like CAMS create secular tailwinds.
3. Strategic Agility: Relocating production, renegotiating supply chains, and prioritizing high-margin programs demonstrate operational flexibility.
4. Valuation and Liquidity: With a dividend yield and a balance sheet capable of weathering tariffs, OSK offers a risk-reward asymmetry.

Risks and the Case for Caution

• Trade Policy Uncertainty: A worsening U.S.-China trade war or further EU tariffs could amplify margin pressures.
• Defense Program Delays: NGDV or MPF setbacks could prolong the Defense segment’s slump.
• Access Segment Recovery: Profitability in aerial platforms hinges on demand resilience and cost cuts.

Conclusion: A Hold Now, Buy Ahead of Q2

Investors should hold OSK while monitoring Q2 results for signs of margin stabilization. If the Vocational segment’s robust performance continues and the Access/Defense segments show progress—such as margin recovery in Access or a Defense contract win—the stock could outperform as trade tensions stabilize.

With a $10.50–$10.00 2025 EPS guidance and a contrarian-friendly valuation, Oshkosh is primed to reward investors who bet on its ability to navigate tariff turbulence. For those willing to look past short-term noise, OSK is a strategic overweight candidate ahead of the next earnings report.

Act now if you believe in operational agility and the power of diversified resilience.