NEW YORK: Slumping defence division sales drove down specialty truck-maker Oshkosh Corp's quarterly profit and revenue, and it forecast lower 2012 sales in that key segment, pressing shares down as much as 15 percent.
Cost-cutting pushed the quarter's results above Wall Street estimates for earnings that have been strained by US defence spending pressures and municipal budget woes that have been curbing sales.
Chief Executive Charles Szews on Thursday said fiscal 2012 would likely be a trough earnings year, noting the economic and federal budget troubles were high hurdles to overcome.
"The significant decline anticipated in US defence spending and further decline in municipal spending in fiscal 2011 and projected again for fiscal 2012 combined with a slow recovery is just too big to overcome in a short period of time," he told analysts on a conference call.
Oshkosh's shares were down 12.3 percent at $25.27 at midmorning on Thursday, off an earlier low at $24.53.
Thursday's stock decline puts the shares down almost 29 percent this year, far underperforming the 4 percent rise in the S&P 500 index.
Earlier in July, billionaire investor Carl Icahn reported a 9.5 percent stake and said he was seeking talks with the specialty truck maker to enhance shareholder value.
Oshkosh executives declined to comment when asked several times on the call about these talks or other plans outside the company to boost shareholder value.
"Modestly lower" revenue and mid-single-digit margins are expected in the defence business next year, Oshkosh said.
That implies significantly lower earnings per share, suggesting 2012 full-year profit closer to $2.60, roughly $1 per share less than estimates, J.P. Morgan analysts said in a note.
Szews said in a statement, "We plan to drive through the pending US defence spending decline by capturing the full benefit of the economic recovery expected in our non-defence markets, continuing to pursue market share gains and expanding into emerging markets."
The Oshkosh, Wisconsin-based company, which makes tactical vehicles for the military, specialty trucks for construction, and emergency vehicles including ambulances and fire trucks, said quarterly defence segment sales fell about 35 percent.
The company posted a profit of $68.4 million, or 75 cents per share, for the third quarter ended June 30, compared with $211.2 million, or $2.31 per share, a year earlier.
A profit of 73 cents per share was expected, on average, according to Thomson Reuters I/B/E/S.
Sales fell to $2.02 billion from $2.44 billion a year ago, but were above the $1.89 billion average estimate.
Oshkosh said its defence downturn was mainly due to the transition from producing its MRAP-All Terrain Vehicles (M-ATVs) to the US Army's Family of Medium Tactical Vehicles, or FMTVs. Oshkosh is the sole supplier of FMTVs through fiscal 2011.
The army could announce as soon as Thursday an order for about $900 million to produce around 7,000 FMTV trucks and trailers, with most production in fiscal 2013, Szews said.
The FMTV program is expected to be profitable around the second quarter of fiscal 2012, the company said.
Access equipment sales to external customers, which were walloped by the downturn in residential and commercial real estate, rose more than 44 percent on demand in North America for replacement equipment.
Including sales to the defence segment, however, access equipment sales dropped 18.4 percent in the quarter from a year ago.
Sales in the company's sales of non-defence vehicles, such as fire trucks and ambulances and aerial access equipment, declined 2.7 percent, mainly due to limited spending by municipalities constrained by tight budgets.
Copyright Reuters, 2011
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