Oshkosh Corp.

The stable outlook on Oshkosh reflects our expectation that its operating performance will remain solid given favorable conditions in its non-cyclical end markets, a healthy backlog, and modest margin improvements driven by recent operational enhancements. In addition, we believe that the company will maintain debt to EBITDA in the low 1.0x range over the next 18-24 months. We could lower our rating on Oshkosh if adverse economic or competitive developments make it unlikely that the company will be able to maintain its profitability and positive free operating cash flow (FOCF). We could also lower our rating on the company if management chooses to adopt a more aggressive financial policy regarding acquisitions or shareholder returns that increases the company's debt-to-EBITDA metric

...Oshkosh Corp.'s Fire & Emergency and Defense segments help mitigate some of the volatility from the more cyclical commercial and industrial markets. Strong backlogs for the remainder of 2019 and 2020 in its more stable segments should result in another year of strong operating performance. The Fire & Emergency segment is dependent on municipal tax receipts, which lag the economic cycle. As a result, Oshkosh has good visibility into these markets. The Defense segment, meanwhile, benefits from the long-term nature of government contracts. The Commercial and Access Equipment markets, in our view, are more cyclical and prone to industrial volatility. We believe any trade wars would hurt economic growth both globally and domestically, limiting the prospects for these markets. Oshkosh continues to operate with low financial leverage. We believe the company will maintain adjusted debt to EBITDA just below 1.0x for 2019 and 2020 due to operational improvements, helping increase EBITDA margins slightly....

Full Report