Accelerating Infrastructure And Electrification Will Unlock Lasting Market Opportunities

Key Takeaways

• Accelerating infrastructure investment and electrification trends provide strong revenue visibility and future growth opportunities across both Access and Vocational segments.
  
• Advanced technology adoption, long-term government contracts, and process innovation drive higher productivity, recurring revenue, and expanding margins.
  
• Margin and earnings volatility are heightened by input cost pressures, reliance on government contracts, global supply chain risks, heavy innovation investment needs, and cyclical market exposure.

Catalysts

Provides purpose-built vehicles and equipment worldwide.

• Oshkosh stands to benefit from a robust and growing backlog in both its Access and Vocational segments, which is being fueled by accelerating infrastructure investment across the U.S. and globally as governments move forward with modernization projects and upgrades to aging fleets. This trend is expected to sustain consistent revenue growth and provide strong visibility into future earnings.
  
• Expansion into electric and hybrid vehicles—including electric fire trucks and postal delivery vehicles—and the launch of next-generation products with advanced automation and telematics position Oshkosh to capture significant market share as more government and municipal customers require electrification and smart technologies, improving both top-line revenue and segment margins over time.
  
• Ongoing investment in process innovation, automation, and manufacturing efficiency is resulting in meaningfully higher plant productivity and operating leverage, which is already translating to significant incremental margins in the Vocational segment and sets the stage for further net margin expansion as volumes ramp.
  
• The company’s strong and expanding pipeline of long-term government contracts, especially with the U.S. Department of Defense and the U.S. Postal Service, underpins recurring revenue and reduces cyclical risk. The ramp-up to full-rate NGDV production is set to drive substantial revenue and margin growth in the Defense segment into 2026 and beyond.
  
• Customer demand for safety, compliance, and technological innovation (including electrification, autonomous systems, and smart fleet solutions) is trending higher across municipal, defense, airport, and construction end markets. Oshkosh’s rapid product development and ability to integrate advanced technology position it to capitalize on premium pricing opportunities and boost net earnings as these markets expand.

Oshkosh Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Oshkosh compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Oshkosh's revenue will grow by 6.7% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 5.8% today to 8.0% in 3 years time.
• The bullish analysts expect earnings to reach $1.0 billion (and earnings per share of $16.18) by about July 2028, up from $614.2 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 12.9x on those 2028 earnings, down from 13.2x today. This future PE is lower than the current PE for the US Machinery industry at 22.9x.
• Analysts expect the number of shares outstanding to decline by 1.09% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.9%, as per the Simply Wall St company report.

Oshkosh Future Earnings Per Share Growth

Risks

• Oshkosh faces execution risk and potential gross margin compression from persistent tariffs, as mitigating actions like supply chain reorganization and cost-cutting may not fully offset higher input costs, particularly in the Access segment where the majority of the tariff impact is concentrated.
  
• The company’s heavy reliance on government and defense contracts creates revenue volatility, and disruptions or shifts in government procurement priorities could negatively impact defense segment revenues, as seen in the breakeven performance at the start of the year and the need for NGDV program ramp-up to achieve growth targets.
  
• Supply chain complexities and exposure to global component sourcing, especially from regions subject to shifting trade policies or geopolitical instability, heighten the risk of production interruptions or cost increases, thereby threatening both revenue growth and net margins across segments.
  
• Oshkosh’s need for ongoing investment in electrification, automation, and compliance with sustainability regulations may necessitate substantial R&D and capital expenditures, putting pressure on operating margins as the company works to keep pace with rapidly evolving industry standards and competitors’ innovation.
  
• Downturns in cyclical end-markets like construction equipment and private nonresidential projects, combined with intensifying competition from global and low-cost manufacturers, risk lower sales volumes and declining pricing power, which could drive increased earnings volatility and limit long-term revenue growth.

Valuation

• The assumed bullish price target for Oshkosh is $169.0, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Oshkosh's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $169.0, and the most bearish reporting a price target of just $91.0.
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be $12.8 billion, earnings will come to $1.0 billion, and it would be trading on a PE ratio of 12.9x, assuming you use a discount rate of 7.9%.
• Given the current share price of $126.04, the bullish analyst price target of $169.0 is 25.4% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.