Oshkosh drives into Afghanistan with big gains
Today's Financial News - Posted July 1, 2009
It is a good day for Oshkosh (NYSE:OSK) and its shareholders, but it will get even better. After surging nearly 400% in the last nine months, today’s news of a billion-dollar contract proves there is more room to run.
By Andrew Snyder, TodaysFinancialNews.com
Baltimore – (TFN): It is no surprise one of the best-performing stocks so far this year is one of my favorites. I began covering Oshosh (NYSE:OSK) when it purchased JLG several years ago. Since then, I have written about the heavy-equipment manufacturer on numerous occasions, almost always touting the company’s revenue-producing potential.
This morning’s news proves that Oshkosh’s potential has become a reality.
Shares of the Wisconsin-based company are soaring by as much as 25% today on news that Oshkosh scored a billion-dollar contract with the American government. The company will get $1.05 billion for producing 2,244 mine-resistant vehicles.
To secure the lucrative contract, Oshkosh had to beat long-term competitors like BAE Systems, Navistar International (NYSE:NAV) and Force Protection (NASDAQ:FRPT). All three companies are currently trading in the red, with Force Protection down by more than 30% on the bad news.
For Oshkosh and its 14,000 employees, today’s news is the start of a new chapter. It proves the billion-dollar company can compete with much larger industry players like Navistar and BAE. By securing the contract, Oshkosh secures a spot among the industry’s leaders.
While much of the Street is focusing on the news of an extra billion in revenues, savvy long-term investors are concentrating on the future revenue stream the production of over 2,200 complicated and specialized vehicles will produce for Oshkosh.
Buy here, pay here
As the military’s mission in Afghanistan lingers, Oshkosh will secure orders for parts, maintenance, upgrades and even refurbishings. A billion dollars will help the company deal with $2.6 billion in long-term debt, but the cash flow from maintaining those vehicles will be the real moneymaker for shareholders.
As I mentioned above, Oshkosh has been one of Wall Street’s biggest gainers so far this year. Since last November, shares have climbed from $3.85 to today’s high of $19.00. It is a gain of just shy of 400%.
Of course, some profit taking will create volatility over the next few weeks, but investors should not believe it is too late to take advantage of the company’s good news.
Oshkosh is just starting to get the momentum it needs to become a leader in its industry. Today’s news will act as a catalyst to help propel the company to a valuation of $3 billion or even $4 billion within the next 12 to 18 months.
As the economy rebounds, budgets expand and inventories dry up, manufacturers like Oshkosh will once again here the sounds of their phones ringing with orders.
Today is a great day for the company and its shareholders, but the news will continue to get better.
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