Manufacturing is coming back to U.S. shores, and this company stands to benefit from it
The pandemic’s supply-chain disruptions spurred massive U.S. policy shifts aimed at boosting on-shore manufacturing.
Oshkosh (OSK), a leading maker of industrial access equipment, specialty vehicles and military trucks, stands to gain as companies reshore and build new factories.
Despite a strong performance last year, its shares trade at a discount, reflecting the market concerns around the USPS contract and industrial cyclicality.
Given its diversified portfolio, engineering expertise and flexible production, Oshkosh is well-positioned to weather short-term headwinds and deliver long-term upside.
Investor Essentials Daily:
Tuesday News-based Update
Powered by Valens Research
The U.S. has learned its lesson from the pandemic and supply chain crisis.
During the pandemic, consumers witnessed extended lead times, increased unavailability of products, and a higher number of canceled orders.
The government is aware of the problem and is trying to fix it.
Under the Biden administration, legislation like the CHIPS Act and the Inflation Reduction Act funneled billions into domestic semiconductor production and clean energy manufacturing.
And now with President Trump, the U.S. is trying to utilize tariffs and deregulation to encourage domestic production.
President Trump has placed a continued emphasis on an “America First” industrial policy, proposing broad new tariffs on imported goods and further deregulation to incentivize U.S.-based manufacturing.
This will be a huge advantage for domestic manufacturing companies. And one of the biggest winners is going to be companies that make the tools needed to build new factories and industrial parks on domestic soil.
One big potential beneficiary in that space is Oshkosh Corporation (OSK).
The company manufactures and markets access equipment, specialty vehicles, and truck bodies for various markets.
Oshkosh’s business is structured across three primary segments.
The Access segment, which produces equipment like aerial work platforms and telehandlers for construction and maintenance, is Oshkosh’s largest and highest-margin division.
The Vocational segment encompasses a diverse range of vehicles, including fire trucks, airport rescue vehicles, refuse collection trucks, and concrete mixers.
Lastly, the Defense segment manufactures military vehicles and is central to a critical contract for the U.S. Postal Service’s (USPS) Next Generation Delivery Vehicles (NGDV).
The company is highly exposed to construction, industrial, institutional, and general maintenance applications.
This makes it well-positioned to benefit from the domestic supply chain supercycle and reshoring, bringing in an increased number of operations and customers.
All these factors combined enabled Oshkosh to achieve a strong 22% Uniform return on assets ”ROA” with 20% asset growth last year.
However, the company only trades at a 9.6x Uniform P/E, reflecting the market’s concerns about tariffs, changes in defense spending, and construction cyclicality.
We can see what the market thinks through our Embedded Expectations Analysis (“EEA”) framework.
The EEA starts by looking at a company’s current stock price. From there, we can calculate what the market expects from the company’s future cash flows. We then compare that with our own cash-flow projections.
In short, it tells us how well a company has to perform in the future to be worth what the market is paying for it today.
At the current stock price, the market expects the company’s Uniform ROA to decline to around 8% from 22% last year.
Despite the immediate headwinds like uncertainties surrounding the USPS contract and cyclical demand in construction, Oshkosh possesses fundamental strengths that position it for future success.
The company’s brand recognition is coupled with robust operational capabilities, including advanced engineering expertise, flexible manufacturing processes and a diversified portfolio that allows it to serve multiple essential sectors.
Therefore, by effectively managing the short-term pressures and leveraging these core assets, Oshkosh has the potential to overcome current market skepticism and translate its operational resilience into notable upside in shareholder value over the long term.
Best regards,
Joel Litman & Rob Spivey
Chief Investment Officer &
Director of Research
at Valens Research
