Oshkosh Corporation’s Q1 2025 Results Reveal Resilience in Vocational Sector Amid Segment Divergence

Oshkosh Corporation (OSK) reported its first-quarter 2025 earnings on April 30, 2025, delivering a mixed performance with declines in net income and sales volume offset by strong gains in its Vocational segment. While the company’s stock has faced headwinds from trade-related pressures and shifting defense priorities, its refuse and recycling vehicle business demonstrated resilience, and management reaffirmed its commitment to cost discipline.

Ask Aime: What impact does Oshkosh Corporation's mixed Q1 2025 earnings have on its stock performance?

Segment Dynamics Highlight Operational Challenges and Opportunities

The quarter’s results underscored stark divergences across Oshkosh’s three core segments:

1. Access Segment (22.7% Sales Decline):
   The Access division, which includes aerial work platforms and lift trucks, saw sales plummet to $957.1 million due to lower North American sales volume, AUSA acquisition-related adjustments, and increased sales discounts. Operating margins collapsed to 10.8% from 16.8% a year earlier, driven by manufacturing inefficiencies and higher new product development costs. This segment’s struggles reflect broader industry pressures, including supply chain volatility and pricing competition in the equipment rental sector.

2. Vocational Segment (12.2% Sales Growth):
   A bright spot was the Vocational division, which builds refuse trucks, fire apparatus, and other commercial vehicles. Sales rose to $866.8 million, fueled by strong demand for refuse/recycling vehicles and pricing improvements. Operating income surged 47.1% to $117.8 million, with margins expanding to 13.6% from 10.4%. This performance highlights the segment’s market leadership and the secular shift toward more durable, high-margin products.

3. Defense Segment (9.1% Sales Decline):
   Defense sales dipped to $463.0 million as the Joint Light Tactical Vehicle (JLTV) program winds down, reducing Department of Defense orders. While production of the Next Generation Delivery Vehicle (NGDV) for the U.S. Postal Service provided some offset, operating income plummeted 95.5% to just $0.6 million. Margins contracted to 0.1% of sales, signaling the need for cost controls as the division transitions to new programs.

Financial Health and Shareholder Returns

Despite the Access and Defense segments’ headwinds, Oshkosh maintained its dividend policy, declaring a $0.51-per-share quarterly payout—a 10% increase from the prior year. The company also repurchased 287,552 shares in Q1, boosting EPS by $0.03. However, rising interest expenses ($25.0 million vs. $20.8 million in Q1 2024) and higher corporate costs ($46.1 million) added pressure.

Outlook: Tariffs and Trade Risks Cloud the Horizon

Oshkosh’s 2025 outlook hinges on global trade dynamics. Management warned that tariffs could reduce adjusted EPS by up to $1.00, partially mitigated by $0.50 in cost-reduction savings. The company now projects full-year adjusted EPS (excluding tariffs) at approximately $11.00, down from prior expectations. This adjustment reflects concerns over U.S.-China trade tensions and potential demand erosion in international markets.

Conclusion: A Stock for the Long Game

Oshkosh’s Q1 results highlight a company navigating sector-specific challenges while capitalizing on its Vocational segment’s strengths. The stock’s valuation—currently trading at ~12.5x 2025E adjusted EPS—appears reasonable given its niche market leadership and dividend yield of ~1.3%. However, investors must weigh near-term risks, including Defense segment volatility and tariff impacts, against long-term catalysts such as:

• Vocational Sector Growth: The refuse/recycling market is expected to grow at a 4-5% CAGR through 2030, driven by urbanization and waste management regulations.
• Defense Pipeline: While NGDV production is underway, Oshkosh’s bid for the Army’s Mobile Protected Firepower program (MPF) could unlock a multi-billion-dollar opportunity.
• Balance Sheet Flexibility: With $600 million in liquidity as of Q1, the company retains capacity to invest in R&D or acquisitions.

In the near term, OSK’s performance will depend on cost-cutting execution and trade policy developments. For investors with a 3-5 year horizon, the stock’s dividend stability and exposure to infrastructure spending may justify a cautious “hold” rating. However, those seeking immediate upside may prefer to wait for clearer visibility on trade disputes and Defense program wins.

Data as of April 30, 2025. Past performance does not guarantee future results.