Will Oshkosh Continue to Outperform After a Strong Quarter?

With shares of Oshkosh Corporation (NYSE:OSK) trading around $41.08, is the company an OUTPERFORM, a WAIT AND SEE, or a STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

C = Catalysts for the Stock’s Movement are Positiveearnings

Earnings reports are usually good for a flurry of trading activity, and Oshkosh’s fiscal first-quarter results were a shining example. Shares surged 18.8 percent after the report, closing the week up 22.3 percent and hitting a new 52-week high of $41.27 per share.

“We started the year strong with results that exceeded our expectations as we continued to execute our MOVE strategy,” chief executive Charlie Szews said. “MOVE provides a clear roadmap and targets for delivering shareholder value, and the Oshkosh team is working diligently to deliver against that roadmap.”

Markets are at 5-year highs! Discover the best stocks to own. Click here for our fresh Feature Stock Pick now!

Oshkosh reported net income of $46.2 million, or $0.51 per share, a year-over-year gain of 18.6 percent, and smashing expectations by nearly 20 cents. Revenues decreased 6.31 percent to $1.76 billion, but still came in slightly ahead of expectations. Consolidated operating income grew to 4.6 percent of sales, or $80.6 million, compared to 4 percent of sales a year ago.

“Our strong first quarter performance and other positive developments, give us confidence to raise our full-year outlook for adjusted diluted earnings per share to a range of $2.80 to $3.05,” Szews added.

T = Technicals on the Stock Chart are Strong

As of January 25, Oshkosh’s stock price was 27.80 percent above its 20-day simple moving average, or SMA; 35.42 percent above its 50-day SMA; and 61.06 percent above its 200-day SMA.

Since the beginning of 2013 the stock price has been in a fairly pronounced upward trend, rising 38.55 percent this year-to-date and rising 66.45 percent year-over-year.

As a benchmark, the S&P 500 has risen 5.38 percent year-to-date, and 13.34 percent year-over-year.

E = Excellent Performance Relative to Peers

Many investors favor return on equity as a key metric to diagnose how well a company is performing. Oshkosh’s operational performance comes in way ahead of its competition with an ROE of 13.36 percent. This compares to Federal Signal Corp. (NYSE:FSS) at 0.16 percent, and Terex Corp. (NYSE:TEX) at 6.43 percent.

Operating margins are also critical to evaluate a company’s performance. With a margin of 4.47 percent, Oshkosh comes in way ahead of Federal Signal Corp., with a margin of 0.04 percent, but lags Terex, with a margin of 4.59 percent.

T = Trends Support the Industry in which the Company OperatesCarl Icahn New Feature 300x270

Anyone who watches the company or the industry may remember when Carl Icahn, a billionaire investor with a penchant for buying stakes in distressed companies and shaking them up, took aim at Oshkosh. Icahn offered a buyout package that valued the truck maker at about $3 billion, 14 percent higher than its $2.62 billion market capitalization on December 4.

Come January 25 and its earnings report, the company’s market cap is nearly $3.7 billion. Icahn believed that Oshkosh needed a management shakeup, but the company (and investors) clearly disagree. Icahn’s offer of $32.50 per share looks almost laughable compared to its January 25 closing price of $41.08.

Oshkosh’s access equipment segment and its fire and emergency segment performed the strongest last quarter. Access equipment grew its sales 15.1 percent, while fire and emergency grew 20.7 percent. While economic headwinds may have buffeted the company in the past, it’s clear that Oshkosh is seeing tremendous success as a result of recovering conditions combined with leaner, more efficient operations.

Conclusion

Before the first-quarter earnings, analysts held a mean target of $36.75 on the stock. It seems fair to expect this number to change as the results settle in, but it also wouldn’t be surprising to see a little bit of selling pressure on the other end. Such a steep climb rarely evens out at its peak.

As evidence, shares dropped as much as 5.5 percent in after-hours trading on Friday, the same day the earnings were released. The results were stellar, but long-term performance will remain difficult.

Because of this, Oshkosh is a WAIT AND SEE. It’s too early to tell what valuation the markets will settle on.

Using a solid investing framework such as this can help improve your stock-picking skills. Don’t waste another minute — click here and get our CHEAT SHEET stock picks now.