Companies that Outperform Judgment: Oshkosh Corporation (OSK) and More

With the construction industry regaining its health and helping create demand for its downstream and upstream businesses, Oshkosh Corporation (NYSE:OSK) has certainly had a good start this year. Finally, this global leader in access equipment and other specialty vehicles is on the mend after shares hit rock bottom amid the campaign of its major shareholder Carl Icahn to gain control of the company last year.

In December the 76-year-old billionaire-shareholder scrapped his takeover plans, as his $32.50 per share offer generated tenders of only 22% out of the 25% threshold Icahn needed to install 13 directors on the Oshkosh board. Previous to the tender offer, he also failed to have his six candidates seated on the company’s board during the company’s annual meeting in January 2012. Icahn’s tender offer has been viewed by Oshkosh top executives and several Wall Street watchers as undervaluing the company. Notably, OSK hit a 52-week low of $15.76 in September last year, prior to the Icahn tender offer announced in October.

Oshkosh Corporation (NYSE:OSK)It’s Hard to Argue against Success

Icahn’s beef against the current Oshkosh management was its $3.2 billion purchase of JLG Industries, a company selling construction-access equipment such as lifts and booms, in 2006. JLG’s sales spiralled downward by nearly 70% along with the collapse of the US construction industry during the Great Recession. Icahn had argued that this business should be sold. The recent upturn of the building industry, however, puts Oshkosh in a position to profit from the opportunities available in the construction sector.

Besides, whatever doubts that Icahn may have on the incumbent Oshkosh management’s capability to run the company profitably have been dashed lately with the company reporting robust growth in its fiscal first quarter earnings. This January, the company, which also makes specialty trucks, reported that its earnings for the quarter grew by 20% on account of lower input costs, which negated the soft performance of its defense segment. These results easily topped expectations, prompting the company to raise its earnings forecast for its fiscal year to an adjusted per-share earnings of between $2.80 and $3.05, up from its earlier forecast of $2.35 and $2.60.

Tracking Shifts in Management Leadership

Terex Corporation (NYSE:TEX) is one company to track in Oshkosh’s industry sector as to how some recent senior leadership changes will affect the bottom line. Among other top executive movements, the current president of the company’s Terex Cranes unit, Phil Widman, has been appointed as Terex SVP and chief financial officer. These key management changes involve most of the company’s operations in the manufacture of a wide range of industrial equipment, including those used by construction companies.

Signs of recovery in non-residential construction prompted some stock analysts to upgrade their recent rating on Terex from underperform to neutral; other ratings of late include a hold based on the company’s revenue growth and good operating cash flow, which were tempered by unimpressive earnings growth and poor profit margins. It is also significant to note that Terex shares hit a new 52-week high of $33.52 just this Feb. 8.

Riding On the Rising Tide of Construction

In a nutshell, the nascent recovery of the US construction industry will be pivotal to the fortunes of companies like Oshkosh and Terex. Count the near-term prospects for Federal Signal Corporation (NYSE:FSS) as well. The managers of this company, which reported a 9.5% decline in revenue in its recent quarterly performance, may have to refocus themselves.

For one, Federal Signal’s equipment inventories for the construction market are reportedly gathering dust on warehouse shelves. The company’s executive team will definitely need some rethinking of its decision to focus company resources on the aerial equipment market; instead, they need to look for growth opportunities in the building industry.

After all, in hindsight Oshkosh’s firm resolve to keep Icahn’s peeve, JLG Industries, has a redeeming value with the construction and building industry now poised as a main primer to the US economic recovery and a great source of growth opportunities.

The article Companies that Outperform Judgment originally appeared on Fool.com and is written by Josef Ray Dagatan.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The Best B-Boy Movies

Most Awesome Hip Hop Documentaries

Foods That Stain Your Teeth

Richest Doctors in the World

The Best Movie Sountracks Ever

The Highest Grossing Musicals on Broadway

The Most Successful Reality TV Stars

Cheapest Cities to Visit in the US

Most Expensive Summer Camps

Most Expensive Animals in the World

Most Expensive Specialty Crops in the World

Movies That Took Ages to Make

The Longest Hollywood Films Ever Made

Most Expensive Concert Stages

The Richest Bands of all Time

10 Most Corrupt Countries 2013 List

10 Countries with the Highest Quality of Life Index

Most Expensive Mattresses in the World

5 Smallest Countries by Land Area

The Ultimate Heartbreak Songs

Richest Teenagers in the World

10 Most Haunted Places in America

10 Best Places to Retire in Florida East Coast

Top 10 Places to See Before You Die

Top 8 Countries in the World Where Justice Prevails

10 Richest States in America

15 Wealthiest Countries in the World

Richest Singers in the World

Most Expensive Tasting Menu in New York City

Most Expensive Baby Items in the World

Most Expensive Hotel Suites in Vegas

Most Expensive Brunch in New York City

Most Expensive Beef Cuts in the World

25 Best Colleges to Get a Job

Top 10 US Supermarkets

The 25 Most Dangerous Cities in the World to Visit

Most Expensive Xbox Games

Top 11 Cities Where Billionaires Live

Top 10 Most Charitable Companies in America

Most Expensive Seafood in the World

The 10 Wildest Conspiracy Theories

The 10 Best Job Markets in the US

Top 10 Accounting Scandals of All Time

The 25 Biggest Cities in the World

Top 10 Best Paying Virtual Jobs

Most Expensive Leather Shoes in the World

Top 6 Things to Buy in March

The 10 Most Stressful Jobs in America – 2014 List

Top 10 Jobs for Introverted People

Top 10 Honeymoon Destinations in the World

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!