Oshkosh Corporation Q3 FY2025 earnings call

Management Statement and Operational Highlights

• Community Engagement: Sponsored the 13th annual 9/11 Memorial Stair Climb raising over $120,000 for the National Fallen Firefighters Foundation and the eighth annual Feed the Body, Feed the Soul event packing 224,000 pounds of rice.
• Financial Results: Delivered an adjusted operating margin of 10.2% on revenue of $2.7 billion in Q3, with adjusted earnings per share of $3.20, a 9.2% increase over the prior year.
• Product Innovations: Showcased the Tempest-si Deicer at the International Airport Ground Service Equipment Expo and the Family of Multi-mission Autonomous Vehicles (FMAV) at the AUSA Defense Conference. Launched the AG619 mid-sized ag telehandler and LiftPod in Europe.
• Vocational Segment: Advanced initiatives to increase fire truck production, with strong orders for Pierce fire trucks and AeroTech products, and the McNeilus Volterra ZSL refuse collection vehicle winning an award.
• Defense Segment: Announced an $89 million order from the US Army for a modernized PLS A2 autonomy-ready heavy tactical truck, continued work on FHTVs, monetized JLTV related technology, and ramped production of the NGDV, with over 4 million miles driven by postal workers.

Segment Performance

• Vocational Segment: Recorded $968 million in sales in the third quarter, with an adjusted operating income margin of 15.6%. Sales grew $154 million or nearly 19% from the prior year, led by improved throughput from municipal fire apparatus and robust growth in airport products. Notable is the McNeilus Volterra ZSL refuse collection vehicle winning an award.
• Transport Segment: Sales increased $48 million to $588 million. Delivery vehicle revenue grew by $114 million to $146 million (now ~1/4 of transport segment revenue). Defense vehicle revenue was lower due to the wind down of the domestic JLTV program but offset by higher international sales of tactical wheeled vehicles and a $25 million onetime license of JLTV related intellectual property. The adjusted operating income margin was 6.2%, an improvement from 2.1% the prior year.
• Access Segment: Delivered sales of $1.1 billion, which was $254 million or nearly 19% lower than the prior year, reflecting weaker market conditions in North America and higher discounts. Despite the revenue decline, it maintained a resilient adjusted operating income margin of 11%. The decline was primarily due to the end of a long-term agreement with Cat for telehandlers, but JLG telehandlers (including Skytrack models) were performing well, and aerials were impacted by soft nonresidential private construction, though long-term market health was seen as strong.

Guidance

• Revised 2025 adjusted EPS guidance to a range of $10.50 to $11, reflecting lower revenue expectations for Access and Transport segments.
• Cash flow outlook updated to $450 million to $550 million, up $50 million from previous outlook, due to lower capital expenditures and rigorous spending controls.
• Plan to continue share repurchases through the balance of the year at a modestly higher pace than in the third quarter.

Risks

• Dynamic External Environment: Uncertainty due to tariffs, prolonged higher interest rates, and changing market conditions.
• Tariffs Impact: Tariffs are expected to have a full-year impact of $30 million to $40 million in 2025, with most in the fourth quarter, and will affect 2026 projections.
• Federal Government Shutdown: Potential material impact on contracts and funding if extended, though no immediate material impact seen in the near term.

Question and Answer

• Q: Mig Dobre on Access demand and tariffs A: John Pfeifer discussed that customers are cautious in the near term regarding CapEx spending due to tariffs and economic environment, but long-term market demand is healthy. Matthew Field mentioned tariffs for 2025 are ~$30-40 million, with most in Q4, and pricing discussions for 2026.
• Q: Stephen Volkmann on offsetting tariff headwind A: Matthew Field stated the approach is multifaceted, including negotiating supply chain, tariff engineering, and then pricing discussions. John Pfeifer added teams are working hard to minimize tariff impact on customers.
• Q: Jamie Cook on warranty costs in defense A: Matthew Field explained it was a one-time item related to repair of units built with interim parts in the defense sector, behind us now.
• Q: Michael Shlisky on Access telehandlers and aerials A: John Pfeifer explained the decline in telehandlers was due to the end of the Cat agreement, but JLG telehandlers are performing well, and aerials are impacted by temporary soft nonresidential private construction with long-term market health expected.
• Q: Christian Zyla on Access Q4 orders and backlog A: Matthew Field noted traditionally Q4 is a big order quarter, but it's too early to determine if it will be normal this year, and backlog skew between nationals and independents is unclear.