Oshkosh Truck (NYSE:OSK)
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5 Years : From Jul 2012 to Jul 2017
Oshkosh Corp.'s (OSK) orders for an all-terrain patrol truck for U.S. troops in Afghanistan are likely to continue to increase, defying original expectations for a low-volume, short-lived program, analysts said Wednesday.
The specialty truck builder disclosed that it received orders for an additional 1,000 trucks, pushing Oshkosh's order volume above the anticipated limit of about 5,200 trucks. The $438 million order, which is Oshkosh's fifth since being chosen to build the truck on June 30, raises the Wisconsin company's total order volume to 6,219 trucks, worth an estimated $3.2 billion.
With fighting in Afghanistan intensifying and an increase in U.S. troop levels becoming increasingly likely, Oshkosh's orders for what the military calls M-ATVs (for mine-resistant, all-terrain vehicles) could eventually approach 10,000 trucks, some analysts predict.
"I'd be surprised if this is the last M-ATV order the company gets," said Charles Brady, an analyst for BMO Capital Markets in Boston. "Presumably, if you put another 30,000 to 40,000 soldiers in Afghanistan, you probably do get closer to an 8,000 or 10,000-unit volume number."
U.S. Defense Secretary Robert Gates is scheduled to visit the company's Oshkosh, Wisc., headquarters Thursday to congratulate workers for expediting production of the trucks.
The company, which also makes fire trucks, cement mixers and aerial construction platforms, expects M-ATV production to reach 1,000 units a month starting in December. At that rate, the company would be able to accommodate additional orders by next spring, analysts said. Oshkosh also recently scored a five-year contract to build up to 23,000 medium-size transport trucks for the U.S. military. The initial phase of that contract calls for Oshkosh to deliver 2,568 trucks starting next year.
The first M-ATVs to roll off Oshkosh's assembly lines are now reaching Army and Marine Corps units in Afghanistan. The vehicles' ability to protect passengers from roadside land mines and navigate through Afghanistan's rugged, mountainous landscape will dictate whether the military expands its fleet.
"A lot of it will depend on how the vehicles perform in" Afghanistan, said Dean Lockwood, an analyst for Forecast International Inc., a defense consultancy in Connecticut.
Oshkosh's truck was chosen over models from larger defense contractors largely because of Oshkosh's suspension system, which gives its trucks greater off-road mobility. The company also has been hired to retrofit the suspension system on the military's mine-resistant ambush-protected, or MRAP, trucks.
More than 16,200 of the armored MRAPs have been built since 2007 by BAE Systems PLC (BAESY, BA.LN), Navistar International Corp. (NAV), Force Protection Inc. (FRPT) and other contractors to protect U.S. troops in Iraq from roadside bomb attacks. But the boxy, top-heavy MRAPs have difficulty traversing steep and unpaved roads, forcing the Pentagon to develop a separate truck for service in Afghanistan.
Oshkosh's stock closed up $1.24, or 3.2%, at $40.25 a share.
-By Bob Tita, Dow Jones Newswires; 312-750-4129; firstname.lastname@example.org