Oshkosh Gets Credit Suisse Upgrade Following Selloff

Credit Suisse’s Jamie Cook believes the 11 percent selloff in Oshkosh Corp OSK shares on September 23, following the company’s “disappointing but realistic” FY17 and long-term guidance, was overdone.

Cook upgraded the rating on the company from Underperform to Neutral while raising the price target from $50 to $54.

Underappreciated Business

The analyst believes Oshkosh’s Defense business had been underappreciated, and mentioned that the company has won additional international M-ATV business, along with the JLTV, which is expected to support the EPS in the event of Access seeing a downturn.

In addition, Cook pointed out that “the Commercial and F&E segments are now experiencing market tailwinds coupled with a self-help story.”

Related Link: Oshkosh Investors Disappointed By Outlook; Watch For Pressure In Other Construction Stocks

FY17 Guidance

Oshkosh guided to adjusted EPS of $3.00–$3.40, below the consensus forecast for FY17, driven by muted expectations for Defense sales and margin due to timing, as well as lower than expected, albeit realistic, margins for Access Equipment.

The company guided to free cash flow of $0–$50 million, associated with a build in working capital related to International MATVs, which Oshkosh is expected to recoup in H1:FY18. This is expected to drive above average free cash flow in FY18.

For FY16, the company has raised its EPS guidance to $2.85–$3.00, driven by earlier than expected International MATV shipments.

The FY16–FY19 EPS estimates have been revised.

At time of writing in Monday's pre-market, Oshkosh was up 1.22 percent at $51.50.

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