What Change Icahn Can Influence At Oshkosh (OSK)

Now that it’s known that investor Carl Icahn is acquiring shares in Oshkosh Corp. (NYSE: OSK) it appears that the stock in the maker of specialty vehicles is going to break back above its 200-day moving average for the first time since the end of April. Icahn has filed a Schedule 13D with the US SEC reporting ownership of 9.5% of Oshkosh shares and call options.

The move is a bit of a puzzler. The company’s largest revenue share comes from its defense business, which posted net sales in its second fiscal quarter, ending in March, of $971.3 million. In the same period a year ago, net sales in the defense segment totaled $2.27 billion. Income from continuing operations in defense totaled $453 million in the second quarter of 2010, compared with just $142 million in the second quarter of 2011.

The rest of the company didn’t do so well either. In the second quarter of 2010, operating income totaled $494 million, compared with just $132.4 million this year. Sales of vehicles like fire trucks to municipalities also fell, as you would expect given the financing troubles facing so many US cities.

Still, the defense business is key. Oshkosh has a contract to produce an all-terrain vehicle for the US Army, but the new machines are less costly than the older version. Switching from the old to the new has been costly and the newer vehicles haven’t ramped up production yet.

When Icahn’s holdings were revealed, the company issued a statement saying that it “believes Mr. Icahn’s investment is evidence of his belief in the value of the Company,” and that the company is “open to dialogue with its shareholders.”

It’s a pretty safe bet that the dialogue will begin with a blast at the company management’s poor performance and proceed from there into how the company plans to regain its lost sales and profits. Oshkosh’s openness to dialogue will be tested early and often.

Oshkosh shares closed at $28.94 yesterday, but after-hours and pre-market action have pushed them up by 8.33%, to $31.35 before the open today. The stock’s 52-week range is $24.63-$40.11. The median price target for the shares is $38.50, and the stock’s trailing P/E is just 5.33.

Paul Ausick