Oshkosh Defense revenue falls on wheeled vehicle cuts

By Ethan Sterenfeld / April 27, 2022 at 3:52 PM

Cuts to the military’s tactical wheeled vehicle budgets, especially in the Army’s medium and heavy wheeled vehicles, led to a decline in Oshkosh Defense’s revenue for the quarter that ended March 31, the company’s chief executive said today.

These cuts were expected in advance, so the lower revenue was not a surprise to the company, Oshkosh CEO John Pfeiffer said on an earnings call. Revenue should recover by the end of next year, as the Army’s Medium Caliber Weapon System and other programs ramp up production.

“Defense is a growth segment for us,” Pfeiffer said. “It doesn’t feel like that in 2022, but we’ve been talking about that for a long time, knowing what the presidential budgets were, that 2022 would be a lull year for tactical wheeled vehicles.”

Increasing commodity costs hurt Oshkosh’s margins in the defense segment, he said.

“Our operating margin in the quarter was lower than expected, as a result of unfavorable cumulative catch-up adjustments due to increased input cost expectations,” Pfeiffer said. “We do not expect margins to be notably lower on a prospective basis at this time.”

Price increases across the company’s segments should start bringing margins back to more typical levels throughout the rest of the year, he said.

“As expected, we experienced peak-level price cost headwinds during the quarter, which challenged margins throughout the company,” Pfeiffer said. “We expect price cost dynamics to improve in the second quarter and into the second half of the year as we begin to more fully realize the benefits of higher pricing levels.”

Oshkosh Corporation’s net sales for the quarter were $1.9 billion, a 3% increase from the same period a year earlier. Adjusted operating income fell by 79.6%, to $29.3 million.

Sales in the defense segment, which includes defense products and Postal Service delivery vehicles, grew by 19.6% in the quarter, to $883 million. Adjusted operating income was $7.5 million, a decline of 90.9% from a year earlier.