Executive Summary / Key Takeaways

• Diversified Strength & Innovation: Oshkosh Corporation (OSK) leverages a diversified portfolio across Access, Vocational, and Transport segments, underpinned by a strategic focus on advanced technologies like autonomy, electrification, and connected products, driving long-term growth and market leadership.
• Robust Financial Performance: The company delivered a resilient Q2 2025 with adjusted operating margin of 11.5% on $2.73 billion in revenue, leading to adjusted EPS of $3.41, demonstrating operational effectiveness despite lower overall sales volume.
• Clear Growth Catalysts: Significant growth is anticipated from the ramp-up of Next Generation Delivery Vehicle (NGDV) production for the USPS, continued capacity expansion and strong demand in the Vocational segment, and improved pricing terms on new defense contracts.
• Strategic Tariff Mitigation: Despite a dynamic international trade environment, management expects to fully offset tariff impacts in 2025 through a "local-for-local" strategy, supplier negotiations, resourcing, and company-wide cost actions, maintaining full-year adjusted EPS guidance of $11.00.
• Ambitious Long-Term Vision: Oshkosh targets a 7-10% compound annual revenue growth rate, 200-400 basis points of margin expansion, and adjusted EPS of $18-$22 by 2028, driven organically by its technological roadmap and market tailwinds.

A Century of Purpose-Built Power: Forging a Resilient Portfolio

Oshkosh Corporation, founded in 1917, has evolved into a global leader in purpose-built vehicles and equipment, strategically diversified across its Access, Vocational, and Transport segments. This foundational diversification has allowed the company to establish an enduring presence in critical industrial, defense, and emergency sectors. The company's overarching "Innovate, Serve, Advance" strategy is a direct outcome of its historical journey, emphasizing the application of cutting-edge technology to meet evolving market demands and enhance operational efficiency for its customers.

The company's core technological differentiation lies not in a single product, but in its integrated approach to applying advanced capabilities across its diverse vehicle platforms. Oshkosh is at the forefront of integrating AI, autonomy, connectivity, and machine learning into heavy-duty equipment. This strategic focus translates into tangible benefits for customers, driving productivity, safety, and total cost of ownership improvements. For instance, the ClearSky Smart Fleet platform, with over 100,000 connected assets, provides two-way communication and over-the-air software updates, enhancing machine uptime and efficiency. The Volterra ZSL electric refuse and recycling vehicle features a fully integrated chassis, offering superior safety, productivity, and ease of use, contributing to lower operating costs for customers like Republic Services (RSG), which recently ordered 100 units.

In the Access segment, the new micro-sized ES1930M scissor lift, specifically designed for data center customers, has seen such strong reception that Oshkosh is already evaluating capacity expansion. The Next Generation Delivery Vehicle (NGDV) for the USPS, a significant program, has already surpassed 1.5 million cumulative miles driven by July 2025, modernizing the postal fleet while dramatically enhancing driver safety and productivity. Furthermore, the company's IMT Cranes have been updated to deliver increased reach, lifting capacity, and reliability across 16 models, incorporating direct customer feedback. Oshkosh AeroTech, a key acquisition, leads with innovative technologies like iOPS fleet management software and investments in autonomous baggage handling vehicles, addressing growing customer demand for improved airport operational efficiency. These technological advancements, including the Collision Avoidance Mitigation System (CAMS) and the HARR-E autonomous refuse collection robot concept, are central to Oshkosh's competitive moat, enabling market leadership and supporting long-term growth by delivering superior economic and operational value to customers.

Oshkosh holds a strong competitive position, particularly in its defense and emergency vehicle segments. The Pierce fire brand is recognized as a market leader, and the company is the number one provider of telehandlers, continuously gaining market share. Compared to Terex Corporation (TEX), Oshkosh's access equipment emphasizes durability and versatility, and its broader market positioning, bolstered by defense and emergency segments, contributes to more stable revenue streams. Against Caterpillar Inc. (CAT), Oshkosh's specialized telehandlers offer significantly greater maneuverability in confined spaces, and its diversification contrasts with CAT's heavy construction emphasis. While CAT benefits from immense scale, Oshkosh excels in specialized vehicle designs for emergency response. In the commercial vehicle space, Oshkosh's offerings demonstrate notably better adaptability for urban infrastructure projects compared to Deere & Company (DE), whose primary focus is agricultural equipment. Oshkosh's competitive advantages stem from its strong brand reputation in specialized markets, proprietary technology (such as its integrated chassis designs and advanced telematics), and unique distribution channels, particularly through government contracts. These factors contribute to higher pricing power, robust customer loyalty, and superior margins in its core segments. Regulatory approvals and high capital requirements also act as significant barriers to entry, further solidifying Oshkosh's market position.

Financial Resilience and Strategic Execution

Oshkosh's financial performance in the second quarter of 2025 underscored its operational resilience amidst evolving market dynamics. Consolidated net sales for the quarter were $2.73 billion, a 4.0% decrease year-over-year, primarily due to lower sales volume in the Access and Transport segments. However, the company's adjusted operating income increased by 11.8% to $313 million, achieving an impressive 11.5% adjusted operating margin, consistent with the prior year despite the revenue decline. This margin expansion was largely driven by lower intangible asset impairments and an improved sales mix. Adjusted diluted earnings per share rose to $3.41, up 2.1% from $2.56 in Q2 2024.

Segment-wise, the Access segment reported sales of $1.26 billion, a 10.7% decrease, and its adjusted operating margin was 14.8%, down from 17.5%. This decline was primarily attributed to the expiration of the Caterpillar-branded telehandler agreement, lower sales volumes in Europe, and higher sales discounts totaling $35.0 million, partially offset by $38.0 million in sales from the AUSA acquisition. Despite these headwinds, the segment maintained resilient margins, reflecting effective cost management and a favorable customer mix. The Access backlog stood at $1.19 billion, a significant decrease from $3.26 billion a year prior, but management noted this is a "totally normal backlog" given current lead times and a return to typical seasonality.

The Vocational segment continued its strong trajectory, with net sales increasing 15.0% to $969.7 million and adjusted operating margin expanding to 15.2% from 12.6% in Q2 2024. This robust performance was driven by higher sales volume from increased production rates and improved pricing, which contributed $49.0 million to sales. The segment's backlog remains substantial at $6.27 billion, up 10.4% year-over-year, providing excellent visibility into future revenue. Deliveries of fire apparatus notably increased by 7% in Q2 2025, contributing to a 20% growth in fire apparatus revenue.

The Transport segment (formerly Defense) saw net sales decrease by 16.2% to $479.1 million, primarily due to lower Joint Light Tactical Vehicles (JLTV) sales volume to the U.S. Department of Defense (DoD). However, the segment's adjusted operating margin significantly improved to 3.7% from 2.1% in Q2 2024, driven by improved pricing under new Family of Heavy Tactical Vehicles (FHTV) contracts and lower new product development costs. Revenue from Next Generation Delivery Vehicles (NGDV) for the USPS represented an increasing share of Transport sales, reaching 22% in Q2 2025, up from 6% a year ago. The Transport backlog grew 5.1% to $6.71 billion.

From a liquidity standpoint, Oshkosh maintains a strong financial position. As of June 30, 2025, the company held $191.7 million in cash and cash equivalents and had $1.12 billion of unused capacity under its Revolving Credit Facility. The debt to total capitalization ratio was 25.2%, remaining within its targeted investment-grade range. Operating activities used $305.7 million of cash in the first six months of 2025, a significant improvement from $566.8 million used in the prior-year period, largely due to lower tax payments and improved management of unbilled receivables. The company repurchased $68.7 million of its common stock in the first half of 2025, with plans to accelerate buybacks in the second half.

Outlook and Strategic Trajectory

Oshkosh's outlook for 2025 reflects a balanced yet ambitious strategic trajectory, underpinned by its operational strengths and long-term market trends. The company projects full-year 2025 adjusted EPS to be approximately $11.00 on consolidated revenue of approximately $10.6 billion. This guidance notably incorporates the expectation that the impact of tariffs will be fully offset, a testament to the company's proactive mitigation strategies, including its "local-for-local" production approach, ongoing supplier negotiations, and strategic resourcing efforts. Management acknowledges the dynamic nature of the tariff environment but expresses confidence in its ability to leverage organizational levers to deliver results.

Looking ahead, the company's 2028 financial targets are particularly compelling, aiming for a 7-10% compound annual revenue growth rate, 200-400 basis points of transformative margin expansion, and adjusted EPS in the range of $18-$22. These targets are organically driven, excluding potential M&A, and are supported by significant investments in new products and technologies, particularly in areas like AI, autonomy, and electrification.

Key drivers for this growth include the continued ramp-up of NGDV production, with full-rate production expected by year-end 2025, which will provide strong revenue growth into 2026. The Transport segment will also benefit from new sole-source contracts for tactical wheeled vehicles, such as the 3-year FMTV contract signed in June 2025 and the 5-year FHTV contract from 2024. These agreements include updated pricing and economic price adjustment mechanisms, expected to yield favorable returns and improve margin resiliency for the core defense business from 2026 onwards. In the Vocational segment, continued capacity expansion and robust demand for fire apparatus and refuse vehicles are expected to drive sustained revenue and margin growth, with pricing benefits from the backlog extending for the next 2-3 years.

While the Access segment anticipates softer market conditions in 2025, particularly in North America and Europe, management expects resilient margins and improving conditions in the second half of the year, providing momentum into 2026. The recently enacted One Big Beautiful Bill Act (OBBBA) is also expected to reduce the company's tax payments in 2025 by approximately $100.0 million, further bolstering free cash flow to a projected range of $400.0 million to $500.0 million.

Despite this optimistic outlook, potential risks remain. The dynamic tariff environment, while currently managed, could shift, impacting costs. Government contracts, particularly with the USPS and DoD, carry termination-for-convenience clauses, though the company is entitled to recover costs and profit. The cyclical nature of the Access equipment market, influenced by U.S. and European economies and construction seasons, presents a potential headwind, especially with "pausing" in private non-residential construction. Furthermore, managing supply chain dynamics, attracting and retaining skilled labor, and accurately predicting input costs remain ongoing operational challenges.

Conclusion

Oshkosh Corporation stands as a compelling investment proposition, demonstrating remarkable resilience and a clear strategic vision in the specialized vehicle and equipment industry. Its century-long history has culminated in a diversified portfolio that effectively balances cyclical and stable markets, underpinned by a relentless pursuit of technological innovation. The company's commitment to autonomy, electrification, and intelligent connected products is not merely aspirational but is actively translating into differentiated products and enhanced customer value, solidifying its competitive moat against rivals.

The strong Q2 2025 financial performance, marked by robust margins despite revenue headwinds, provides tangible evidence of operational excellence and strategic execution. With the NGDV ramp-up, favorable defense contract terms, and sustained growth in the Vocational segment, Oshkosh has clear catalysts for near-term and long-term value creation. The ambitious 2028 targets, coupled with proactive tariff mitigation and disciplined capital allocation, paint a picture of a company poised for significant earnings and free cash flow expansion, making Oshkosh a compelling consideration for discerning investors.