Oshkosh's Q3 2025 Earnings Call: Contradictions Emerge in Tariff Mitigation Strategies and Access Segment Demand Outlook

Date of Call: October 29, 2025

Financials Results

• Revenue: $2.7 billion, down $53 million or 2% YOY
• EPS: Adjusted EPS of $3.20, up $0.27 or 9.2% YOY (benefit of about $0.30 from lower tax expense related to resolution of a multiyear U.S. federal tax audit)
• Operating Margin: Adjusted operating margin of 10.2%, roughly in line with prior year

Guidance:

• 2025 adjusted EPS guidance narrowed to $10.50–$11.00 and revenue guidance to approximately $10.3B–$10.4B.
• Access and Transport adjusted operating margins moderated to reflect current sales outlook and NGDV production expectations.
• Cash flow outlook raised to $450M–$550M; CapEx reduced by roughly $50M (timing and stricter controls).
• Continue share repurchases through year-end at a modestly higher pace.
• Management expects to pursue price increases in 2026 to offset tariff-driven input cost pressure.

Business Commentary:

* Revenue and Operating Margin Trends: - Oshkosh Corporation reported adjusted revenue of $2.7 billion for Q3 2025, a slight decrease of 2% from the same quarter last year. - The company maintained an adjusted operating margin of 10.2%, which is roughly in line with last year despite slightly lower sales. - The decrease in revenue and stable margin were driven by lower sales volume in the Access segment partially offset by higher vocational and transport sales volume and improved pricing.

• Access Segment Challenges and Strategy:
• The Access segment experienced a 19% decline in revenue, with sales of $1.1 billion, primarily due to weaker market conditions and higher discounts.
• Despite the revenue decline, the segment maintained an adjusted operating income margin of 11%, showcasing resilient performance amidst market dynamics.

• The company is focusing on a local-for-local manufacturing strategy and disciplined pricing to manage tariff impacts and maintain market competitiveness.

• Tariff Impact and Mitigation Strategies:

• Tariffs are estimated to result in a full-year cost impact of $30 million to $40 million, with $20 million to $30 million expected in the fourth quarter.
• Oshkosh is aggressively pursuing cost levers and engaging in price negotiations with customers to mitigate tariff impacts, with plans to raise prices in 2026.

• The company's strategy includes supply chain negotiation, tariff engineering, and sourcing adjustments to minimize tariff costs.

• Transport Segment Performance and Defense:

• The Transport segment's sales increased by 48 million to $588 million, with delivery vehicle revenue growing by 37% sequentially.
• The segment delivered an improved operating income margin of 6.2%, reflecting favorable pricing and a onetime revenue boost from a license of JLTV intellectual property.
• The defense portion of the transport segment is seeing lower demand due to program wind-downs, while international sales and core program advancements are supporting growth.

Sentiment Analysis:

Overall Tone: Neutral

• Management highlighted resilience: adjusted EPS up 9.2% and 10.2% adjusted operating margin, yet reduced FY EPS guidance to $10.50–$11 due to softer Access demand and tariffs. They emphasized mitigation actions (tariff engineering, sourcing, pricing discussions) and one-time headwinds (warranty charge) while maintaining confidence in long-term demand.

Q&A:

• Question from Mircea Dobre (Robert W. Baird & Co. Incorporated, Research Division): Maybe we can start with Access a little bit... what is your sense for where demand seems to be shaken out because we have seen some that are increasing CapEx... production likely to be down in the first half of '26?
  Response: Not providing 2026 guidance now; near-term customer hesitancy (Q3/Q4) but long-term demand drivers remain healthy; clarity expected after Q4 and formal guidance in January.

• Question from Mircea Dobre (Robert W. Baird & Co. Incorporated, Research Division): Can you quantify tariffs and how you'll mitigate them into next year?
  Response: Tariffs are ~$30M–$40M for the year (mostly Q4 ~$20M–$30M); mitigation via supply-chain actions and tariff engineering, with some pricing expected to be implemented in 2026.

• Question from Stephen Volkmann (Jefferies LLC, Research Division): Is it reasonable to think you can offset the tariff headwind during 2026?
  Response: Plan is multifaceted—supply-chain negotiation, tariff engineering (sourcing/import classification) and then pricing; goal is to minimize customer impact, but timing/extent of offset is uncertain.

• Question from Stephen Volkmann (Jefferies LLC, Research Division): Implied incremental margins for vocational in Q4 look very high (~40%). How should we think about that going forward?
  Response: Q4 math implies ~40% incremental margin, full-year guidance implies ~33% incrementals; strong vocational throughput and mix drove results, but 2028 annualized incrementals are expected to be lower than Q4 spike.

• Question from Jamie Cook (Truist Securities, Inc., Research Division): With Section 232 and tariffs, are you positioned to gain share based on your manufacturing footprint?
  Response: We pursue a local-for-local strategy (U.S. & Europe manufacturing) which helps manage tariffs and positions JLG favorably versus non‑U.S. competitors.

• Question from Jamie Cook (Truist Securities, Inc., Research Division): Can you quantify discounting in the Access market?
  Response: Access experienced roughly 3%–4% all-in discounts in Q3; pricing dynamics are expected to change in 2026 as tariffs take effect.

• Question from Tami Zakaria (JPMorgan Chase & Co, Research Division): What drove warranty costs this quarter and should we expect more?
  Response: A one-time warranty charge tied to legacy defense units built with interim parts from 2021–22 supply issues (about $13M impact); management expects this to be behind them and not recurring.

• Question from Tami Zakaria (JPMorgan Chase & Co, Research Division): How is Access pricing trending for the year and into 2026?
  Response: 2025 saw negative pricing in Access due to weak demand; with tariffs coming into play, pricing discussions for 2026 will create a different (more positive) pricing environment.

• Question from Michael Shlisky (D.A. Davidson & Co., Research Division): Telehandlers were down materially; what's driving that versus core aerials?
  Response: Primary cause was the end of the long-term Cat distribution agreement; JLG telehandlers maintain share and aerial weakness is cyclical tied to soft nonresidential construction.

• Question from Michael Shlisky (D.A. Davidson & Co., Research Division): Any impact from a federal government shutdown on grants or demand?
  Response: No material near-term impact observed; if a shutdown is prolonged there could be modest contract or funding effects to monitor.

• Question from Kyle Menges (Citigroup Inc. Exchange Research): NGDV sales of $146M were below expectations; what's driving ramp challenges and is 16k–20k annualized still feasible?
  Response: NGDV plant/automation ramp challenges have limited pace; management still targets full-rate production by year-end and expects sequential revenue growth, though execution risks remain.

• Question from Kyle Menges (Citigroup Inc. Exchange Research): Why was CapEx guidance cut by ~$50M?
  Response: CapEx reduced due to stricter spending controls and timing of expenditures.

• Question from Angel Castillo Malpica (Morgan Stanley, Research Division): Is customer cautiousness showing as lower bookings, cancellations, or delivery pushouts and how do nationals vs independents differ?
  Response: Q3 book-to-bill was ~0.6 (normal for Q3); market utilization and used markets are healthy—caution manifests as near-term delayed capex rather than widespread cancellations; behavior varies across nationals and many independents.

• Question from Angel Castillo Malpica (Morgan Stanley, Research Division): What is the magnitude and timing of price increases being discussed for 2026?
  Response: Too early to quantify or commit; pricing discussions are ongoing and timing is preliminary.

• Question from Timothy Thein (Raymond James & Associates, Inc., Research Division): How should we think about 4Q order activity composition and vocational (Pierce) mix implications for margins?
  Response: 4Q Access order intake will determine FY outcome (hence the EPS range); Pierce throughput is improving, backlog will decline over time, and Build My Pierce stock units show no material margin disadvantage versus fully customized units.

• Question from Christian Zyla (KeyBanc Capital Markets Inc., Research Division): Will the typical Q4 step-up in Access orders still occur or shift to Q1; how is the backlog split?
  Response: Traditionally Q4 steps up but this year it's unclear—some decisions/pricing may push into January; too early to say how backlog skews between nationals and independents.

• Question from Christian Zyla (KeyBanc Capital Markets Inc., Research Division): On defense transport demand and CTT program, what differentiates Oshkosh?
  Response: Differentiators are technological capability (autonomy) and longstanding quality/service reputation, which support competitiveness in transport/CTT opportunities.

• Question from David Raso (Evercore ISI Institutional Equities, Research Division): Of the defense revenue cut by $200M, how much was the postal truck and is the ramp issue BEV or ICE related?
  Response: The reduction was all on the delivery/postal vehicle side; ramp issues are plant/automation and manufacturing dial-in challenges, not specific to BEV vs ICE.

• Question from David Raso (Evercore ISI Institutional Equities, Research Division): How much of the EBIT cut is under your control and when can delivery revenue approach ~ $300M/quarter?
  Response: Management notes the one-time warranty (~$13M) impacted OI and the JLTV licensing was expected in guidance; they believe delivery revenue targets are achievable and aligned with their plans, but timing depends on ongoing ramp execution.

Contradiction Point 1

Tariff Mitigation Strategies and Impact

It involves differing approaches to managing tariff impacts, which are crucial for financial performance and investor expectations.

How have tariffs changed for Oshkosh, and how will you mitigate them? - Mircea Dobre (Baird)

2025Q3: Tariffs for this year are estimated at $30 million to $40 million, with about $20 million to $30 million in the fourth quarter. We are aggressively pursuing cost levers, and discussions with customers regarding pricing increases for 2026 are ongoing. - Matthew Field(CFO)

How is Oshkosh Corporation planning to manage the impact of tariffs with weaker demand than a few years ago? - Stephen Volkmann (Jefferies)

2025Q1: Our approach is to minimize the impact on customers. We have pricing power in all our segments, but our priority is to minimize disruption. We focus on targeted areas for mitigation, primarily in the top three countries affected by tariffs. We aim to do this effectively despite potential elasticity in demand. - John Pfeifer(CEO)

Contradiction Point 2

Access Segment Demand and Market Conditions

It highlights differing perspectives on demand and customer behavior in the Access segment, which impacts business strategy and financial expectations.

Is the Access cautious customer behavior due to order cancellations or pushouts? - Angel Castillo (Morgan Stanley)

2025Q3: We are seeing a normal book-to-bill ratio for the third quarter. Customers are cautious in the very near term due to market uncertainties but remain focused on long-term demand. - John Pfeifer(CEO)

How is the competitive landscape in the Access equipment market evolving, and are tariffs affecting pricing? Has the tax bill influenced customer behavior? - Angel Castillo (Morgan Stanley)

2025Q2: We think we might see a very slow recovery in the back half of this year. It is not a sudden change, but we did not anticipate this kind of slowdown. It's primarily psychology and a very cautious investment strategy. - John Pfeifer(CEO)

Contradiction Point 3

Tariff Mitigation and Cost Management

It involves Oshkosh's approach to managing tariffs and the expected impact on its operations and financials, which are critical for assessing the company's cost management strategies and financial performance.

How has the tariff situation changed for Oshkosh, and how will you address these changes moving forward? - Mircea Dobre (Baird)

2025Q3: Tariffs for this year are estimated at $30 million to $40 million, with about $20 million to $30 million in the fourth quarter. We are aggressively pursuing cost levers, and discussions with customers regarding pricing increases for 2026 are ongoing. - Matthew Field(CFO)

Can you break down the Access decline by price and volume? - Angel Castillo (Morgan Stanley)

2024Q4: We expect to finalize an agreement with our Mexico-based supplier by the end of the year and expect to mitigate the import tariffs through those negotiations. - Matthew Field(CFO)

Contradiction Point 4

Demand and Market Conditions in Access Equipment

It reflects differing perspectives on the state of demand and customer behavior in the Access equipment segment, which is crucial for understanding Oshkosh's growth prospects and operational strategies.

Where do you see demand trends for Access equipment, and what is the outlook for the segment next year? - Mircea Dobre (Baird)

2025Q3: We are not guiding today, but we see long-term demand drivers remaining strong. The current environment causes customers to hesitate in the near term, but private construction activity and commercial projects are picking up. We expect increased equipment demand in 2026. - John Pfeifer(CEO)

How do you expect visibility in Access to compare between H1 and H2? How is AeroTech's integration and synergies progressing? - Steven Fisher (UBS)

2024Q4: We expect a normalized seasonal pattern, with more typical seasonality in the second half. Fleet metrics are healthy, with softer non-residential construction affecting fleet growth. - John Pfeifer(CEO)

Contradiction Point 5

Access Segment Demand and Customer Behavior

It reflects differing perspectives on the demand outlook and customer behavior in the Access segment, which impacts revenue projections and market positioning.

Where is demand stabilizing for Access equipment, and what are your expectations for the segment next year? - Mircea Dobre (Baird)

2025Q3: Currently, our customers remain focused on their long-term demand requirements as they assess the current market conditions and its impact on their future access equipment needs. - John Pfeifer(CEO)

Has the segment guidance changed except for the $0.50 tariff mitigation drag? Is the impact primarily on Access with some spread across companies? - David Raso (Evercore)

2025Q1: We are seeing some customers pull back on orders as they assess the current market conditions and its impact on their future access equipment needs. - John Pfeifer(CEO)