Oshkosh Corporation (OSK) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call presents a mixed outlook. While there are positive elements like strong vocational segment backlog and long-term EPS growth vision, challenges include lower EPS guidance, tariff impacts, and declining Access Equipment revenue. Management's optimism about cost reductions and pricing adjustments is tempered by uncertainties and lack of detailed guidance in some areas. The Q&A reveals concerns over tariffs and cost dynamics, but also emphasizes potential improvements. Overall, the sentiment is balanced, leading to a neutral prediction for stock price movement.
Key Financial Performance
Full Year Revenue $10.4 billion, leading to adjusted operating income of just over $1 billion and adjusted earnings per share of $10.79. The team managed costs and supply chain effectively amidst evolving tariff landscapes.
Q4 Revenue $2.7 billion with an adjusted operating margin of 8.4%. Adjusted EPS was $2.26, in line with prior guidance. Strong performance in Access and Vocational segments contributed to the results.
Access Segment Q4 Revenue $1.2 billion, roughly equal to last year. Orders were strong at $1.7 billion, leading to a book-to-bill ratio of 1.5. Backlog was $1.3 billion. Nonresidential construction softness impacted the segment.
Vocational Segment Full Year Revenue $3.7 billion, up nearly 13% year-over-year. Adjusted operating income margin was 15.8%. Fire apparatus sales increased by 17%, and airport products sales grew by 13%.
Transport Segment Q4 Revenue $567 million, with delivery vehicle revenue growing by $130 million to $165 million. Operating income margin was 4%, up from 2.8% last year, reflecting improved pricing and NGDV ramp-up costs.
Free Cash Flow $540 million for Q4 and $618 million for the full year, representing 96% of net income. This was above guidance due to improved customer advances and lower capital expenditures.
Share Repurchases 912,000 shares for $119 million in Q4, totaling $278 million for the year, more than double the prior year. This benefited adjusted EPS by $0.06 in Q4 compared to the prior year.
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Operating Highlights
Robotics and AI Integration: Showcased a welding robot concept using JLG boom lift, autonomous scissor lifts, AI software, and sensing technologies. Demonstrated modular airport robot platform for tarmac operations and perimeter detection robots for airports.
Safety Innovations: Introduced Collision Avoidance Mitigation System (CAMS) for firefighters and other emergency responders, field-tested with positive feedback.
Electric and Hybrid Vehicles: Highlighted hybrid electric Volterra ARFF and McNeilus Volterra electric refuse and recycling collection vehicle.
Airport Products: Sales up 13% in 2025, driven by investments in airport infrastructure and technology adoption.
Vocational Segment Growth: Fire apparatus sales up 17% in 2025, with improved production throughput and reduced lead times.
Revenue and Earnings: 2025 revenue reached $10.4 billion with adjusted operating income of $1 billion and EPS of $10.79.
Cost Management: Effectively managed costs and supply chain amidst evolving tariff landscape.
Production Investments: Invested $150 million to improve throughput in fire truck production, with $70 million spent to date.
Market Positioning: Focused on transforming industries with next-generation products and technology to achieve long-term growth.
Transport Segment Transformation: Increased NGDV shipments, surpassing 5,000 units and 10 million miles driven, with plans for further defense contracts and delivery vehicle growth.
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Risk or Challenges
Economic Conditions: The company anticipates weaker market conditions in the Access segment due to expected lower capital investments by industrial customers and a lack of improvement in nonresidential construction in 2026. This could negatively impact revenue in the first half of 2026.
Tariffs: The company expects tariffs to have a significant financial impact in 2026, with an estimated cost of $200 million, which is $160 million higher than in 2025. This could affect profitability, particularly in the Access segment.
Supply Chain and Production Challenges: The company is investing $150 million to improve production throughput in its fire truck business, but delays in achieving these improvements could impact delivery schedules and revenue.
Product Mix and Costs: Unfavorable product mix and higher manufacturing overhead costs negatively impacted adjusted operating income in the fourth quarter of 2025. This trend could continue to affect margins if not addressed.
Seasonal and Market Demand Variability: The strong Q4 2025 sales in the Access segment, driven by pre-2026 price increases, are expected to adversely impact Q1 2026 volumes. Additionally, the company anticipates softer market conditions in North America for Access products.
Defense Segment Risks: The wind-down of the domestic JLTV program has reduced defense vehicle revenue, and the company is transitioning to new contracts. Delays or issues in ramping up these new programs could impact the Transport segment's performance.
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Guidance & Outlook
2026 Adjusted EPS: Expected to be approximately $11.50, reflecting strong performance in the vocational segment and ramp-up of NGDV in the Transport segment, partially offset by weaker market conditions in the Access segment.
2026 Revenue: Projected to be approximately $11 billion, representing mid-single-digit growth.
Access Segment Revenue: Expected to be approximately $4.2 billion with an adjusted operating margin of 10%, reflecting softer market conditions in North America.
Vocational Segment Revenue: Projected to be approximately $4.2 billion with an adjusted operating margin of approximately 17%, supported by favorable price/cost dynamics and volume growth from improved production throughput.
Transport Segment Revenue: Expected to be approximately $2.5 billion with an operating margin of approximately 4%, driven by NGDV production ramp-up and new FMTV contract.
Capital Expenditures: Estimated at approximately $200 million for 2026.
Free Cash Flow: Projected to be between $550 million and $650 million, approximately 80% of net income.
Tariff Impact: Assumes present tariff rates remain in place throughout 2026, with an estimated impact of $200 million, $160 million higher than 2025.
Nonresidential Construction Activity: Assumed to remain roughly flat in 2026, in line with external projections.
First Quarter 2026 Adjusted EPS: Expected to be about half of the first quarter of 2025 due to seasonal factors and strong Q4 2025 customer response to pricing actions.
Long-term EPS Growth: Guidance supports achieving adjusted EPS range of $18 to $22 per share by 2028.
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Shareholder Return Plan
Quarterly Dividend: Announced a quarterly dividend of $0.57 per share.
Share Repurchases: Repurchased approximately 912,000 shares of stock for $119 million in the fourth quarter, bringing total share repurchases in 2025 to $278 million, more than double the prior year.
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Key Q&A
Q:What is the reason for the disconnect between Access guidance and competitors like United Rentals?
A:John Pfeifer explained that the company is taking a balanced approach to 2026, considering strong demand from mega projects like data centers and power generation, but also noting pressure in private non-residential construction. He highlighted differences in customer exposure to these segments, with some customers more affected by private non-residential construction challenges.
Q:How are transport margins expected to progress in 2026?
A:Matthew Field stated that transport margins are expected to improve in the second half of 2026 due to pricing for new contracts, steady production increases for NGDV, and further NGDV orders. However, lower defense volume and investments in new product development will impact margins, resulting in an overall 4% margin for 2026.
Q:What is the health of the U.S. and European markets for Access Equipment?
A:John Pfeifer noted that the fleet in both the U.S. and Europe is healthy, with good utilization and a healthy used market. However, there is uncertainty about when an inflection point in non-residential construction will occur, leading to a balanced outlook for 2026.
Q:What is the expected earnings acceleration in the first quarter of 2026?
A:Matthew Field explained that first-quarter earnings are expected to be about half of the previous year due to strong fourth-quarter sales in 2025, adverse price costs, and moderate impacts from tariffs. Cost reductions will progressively improve throughout the year.
Q:What is the visibility for Access Equipment revenue and margins for 2026?
A:Matthew Field stated that the full-year revenue guide is $4.2 billion, a 6%-7% decline year-over-year. The first quarter will see a higher year-over-year decline due to strong fourth-quarter 2025 sales and pricing pull-forwards. John Pfeifer added that the backlog of $1.3 billion supports the full-year guide, with the first half under pressure and improvement expected in the second half.
Q:When will NGDV reach full run rate production?
A:John Pfeifer stated that the company is on track to produce 16,000-20,000 units annually, with 2026 production at the low end of this range. Production will be higher in the second half of the year, and the U.S. Postal Service is satisfied with the deliveries.
Q:What are the ordering dynamics in Access Equipment for 2026?
A:Matthew Field noted that strong sales to independents in the fourth quarter of 2025 are expected to normalize in 2026. The company anticipates a more balanced mix of independent rental companies (IRCs) and national rental companies (NRCs) in 2026.
Q:What is the rationale behind showcasing a non-USPS delivery vehicle at CES?
A:John Pfeifer explained that the vehicle demonstrates the company's capability to deliver advanced, purpose-built last-mile delivery vehicles with technology for productivity, safety, and economic performance. It highlights opportunities beyond the NGDV program.
Q:How much pricing is embedded in the 2026 sales guide for Access Equipment?
A:John Pfeifer stated that pricing reflects the need to offset tariffs and maintain a balanced price/cost equation. The company has undertaken engineering and sourcing initiatives to mitigate tariff impacts, but some costs have been passed through to customers.
Q:What is the impact of tariffs and cost dynamics on Access Equipment margins?
A:Matthew Field explained that tariffs will have a $200 million impact in 2026, with $160 million affecting Access Equipment. Cost reduction initiatives and stable raw material prices are expected to offset some of these impacts, with price/cost turning positive in the second half of the year.
Q:What is the outlook for the vocational segment in 2026?
A:John Pfeifer stated that the vocational segment remains strong, with healthy backlogs in fire and AeroTech businesses. However, there is some pressure in the environmental business due to a temporary lull in CapEx. Long-term prospects remain positive.
Q:How will transport margins progress from 2026 to 2028?
A:Matthew Field explained that transport margins will improve due to new pricing on contracts, NGDV ramp-up, and increased defense volume. The second half of 2026 will be stronger, and the company remains confident in achieving its 2028 margin targets.
Q:What are the margin improvement opportunities in AeroTech?
A:John Pfeifer highlighted technological innovations like autonomous jet docking and cargo loading, as well as operational improvements through 80/20 initiatives, as key drivers for margin expansion in AeroTech.
Q:What caused the adverse mix in the fire segment in the fourth quarter?
A:Matthew Field explained that the mix included more one-off orders rather than batch orders, which temporarily impacted margins. This is not expected to be a sustained issue.
Q:What is the visibility into costs for Access Equipment in 2026?
A:Matthew Field stated that the company has good visibility into costs, with stable raw material prices and ongoing cost reduction initiatives. Price/cost is expected to turn positive in the second half of the year.
Q:What is the impact of incremental tariffs in 2026?
A:Matthew Field stated that tariffs will have a $200 million impact in 2026, with $160 million affecting Access Equipment. The company assumes current tariff rates will remain throughout the year.
Q:What drives the incremental margins in the vocational segment?
A:Matthew Field explained that volume growth, price realization, and investments in capacity and cost reduction initiatives are key drivers. The segment is expected to achieve 17% margins in 2026, consistent with long-term guidance.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on the exact timing of an inflection point in non-residential construction, the precise breakdown of cost impacts from tariffs versus other factors, and the exact contribution of pricing versus volume to incremental margins in the vocational segment. Additionally, they did not quantify the expected margin improvement from 80/20 initiatives in AeroTech or provide a detailed breakdown of cost buckets for Access Equipment.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI
Access sale
CAMS
Delivery
JLG boom
Officer Slide
Picks Award
Transport segment
airline
airport future
attendee
boom lift
booth
capital investment
concept
contamination
continuation
contract ramp
detection
equipment job
estimate
fire apparatus
flow income
generation
hero
highlight
income share
margin price
opportunity
platform
product mix
production throughput
response
robot
robotics
sale Access
sale outlook
segment expectation
segment sale
show
technology CES
throughput fire
traffic
OSK Transcript
Oshkosh Corporation (OSK) Q4 2025 Earnings Call Transcript
Unknown1-29
The earnings call presents a mixed outlook. While there are positive elements like strong vocational segment backlog and long-term EPS growth vision, challenges include lower EPS guidance, tariff impacts, and declining Access Equipment revenue. Management's optimism about cost reductions and pricing adjustments is tempered by uncertainties and lack of detailed guidance in some areas. The Q&A reveals concerns over tariffs and cost dynamics, but also emphasizes potential improvements. Overall, the sentiment is balanced, leading to a neutral prediction for stock price movement.
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Oshkosh Corporation (OSK) Q3 2025 Earnings Call Transcript
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The earnings call shows mixed signals: strong free cash flow and improved margins in the transport segment are positive, but declining sales in the Access segment and weak guidance affect sentiment. Q&A highlights challenges with tariffs and production delays, while management's lack of clarity on future guidance raises concerns. Given these mixed factors, the stock is likely to see a neutral movement in the short term.
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OSK Report
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