Yahoo Finance Oshkosh Corporation (NYSE:OSK) Q1 2024 Earnings Call Transcript
Oshkosh Corporation (NYSE:OSK) Q1 2024 Earnings Call Transcript April 25, 2024
Oshkosh Corporation beats earnings expectations. Reported EPS is $2.89, expectations were $2.26. Oshkosh Corporation isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Greetings, and welcome to the Oshkosh Corporation First Quarter 2024 Results Conference Call. [Operator Instructions]. It is now my pleasure to introduce your host, Pat Davidson, Senior Vice President of Investor Relations for Oshkosh Corporation. Thank you, sir. You may begin.
Patrick Davidson: Good morning, and thanks for joining us. Earlier today, we published our first quarter 2024 results. A copy of that release is available on our website at oshkoshcorp.com. Today's call is being webcast and is accompanied by a slide presentation, which includes a reconciliation of GAAP to non-GAAP financial measures that we will use during this call and is also available on our website. The audio replay and slide presentation will be available on the website for approximately 12 months. Please refer now to Slide 2 of that presentation. Our remarks that follow, including answers to your questions, contain statements that we believe to be forward-looking statements within the meaning of the Private Securities Litigation Reform Act.
These forward-looking statements are subject to risks that could cause actual results to be materially different from those expressed or implied by such forward-looking statements. These risks include, among others, matters that we have described in our Form 8-K filed with the SEC this morning and other filings we make with the SEC. We disclaim any obligation to update these forward-looking statements, which may not be updated until our next quarterly earnings conference call, if at all. Our presenters today include John Pfeifer, President and Chief Executive Officer; and Mike Pack, Executive Vice President and Chief Financial Officer. Please turn to Slide 3, and I'll turn it over to you, John.
John Pfeifer: Thank you, Pat, and good morning, everyone. I'm pleased to announce another strong quarter with year-over-year growth in revenue and earnings. This solid start to 2024 is a testament to our Innovate, Serve, Advance strategy and the hard work of our people as we continue to launch new innovative products and technologies while adding capacity for several of our businesses. For the first quarter, we achieved an 80% increase in adjusted operating income, leading to an adjusted operating margin of 10.8% and adjusted EPS of $2.89. These results were led by outstanding business execution across our segments and supported by the benefit of acquisitions. We continue to focus on execution. Importantly, we're driving improvements in our businesses, contributing to strong performance in the quarter and supporting our positive outlook for the remainder of the year.
We are also focused on becoming a more resilient company throughout the business cycle while driving long-term growth, and we are confident we're making meaningful progress. Our confidence is fueled by several key factors, including significant investments in market-leading technologies that we expect will drive demand for the next decade and beyond; robust backlogs that provides strong visibility; the ramp-up of several new innovative products, including Next Generation Delivery Vehicles and the benefits of strategic acquisitions such as AeroTech. Based on our first quarter results, along with solid execution and healthy demand for Oshkosh products, we are raising our full year outlook for adjusted EPS and to be in the range of $11.25 per share.
Notably, our current expectations place us within the range of our Investor Day target of $11 to $13 per share a year early and demonstrates our ability to continue to drive accelerated growth and shareholder value. Please turn to Slide 4, and we'll get started on our segment updates. Our team at Access is performing well. For the quarter, Access grew revenue by 3.7% and delivered an adjusted operating margin of 17%. We continue to invest in new products and technologies, including Moments Of Autonomy and ClearSky SmartFleet, our next-generation IoT platform, enabling 2-way real-time communications that we believe will contribute to long-term success in the access market. Last quarter, we told you that we expected customer order timing to begin normalizing leading to lower orders in the first half of 2024 relative to both the prior year and the second half of the year, given that 2024 was largely booked as we entered the year.
This remains the case although healthy orders of $940 million in the first quarter exceeded our expectations. We continue to expect that the majority of 2025 orders will be booked in the second half of 2024, particularly in the fourth quarter, which more closely aligns with historical order timing. Demand for aerial work platforms and telehandlers in North America continues to be solid, supported by infrastructure investments, mega projects and industrial onshoring projects as well as elevated fleet ages. Moving to operations and supply chain. Our team continued to make progress with supplier on-time deliveries in the first quarter, which were in the 85% range. The combination of improving supply chain deliveries and our continuous improvement initiatives is contributing to increased throughput in our manufacturing facilities.
We are progressing well with our plans to repurpose the Jefferson City, Tennessee facility for telehandler production. We are transitioning the facility throughout 2024 as Defense Fabrication Work moves back to Oshkosh. We expect a meaningful ramp in telehandler production capacity in the facility for 2025 which will help us capitalize on demand for our equipment. Importantly, we believe there are many opportunities to continue to drive growth and strong performance at Access over time. Please turn to Slide 5, and I'll review our Defense segment. As we have discussed, 2024 is a significant transition year for our defense segment as we are winding down production of domestic JLTVs during the year. Simultaneously, we will be ramping up production of the U.S. Postal Services Next Generation Delivery Vehicle or NGDV.
This month, the first NGDV units came off the production line in Spartanburg, South Carolina. Our team has spent a tremendous amount of time planning and executing this program launch, and I'm pleased with our progress. We look forward to a long and successful partnership with the U.S. Postal Service as we modernize their fleet over the next 10 years. As a reminder, we expect to increase vehicle production throughout '24 and 2025 and exit 2025 at full rate production. We continue to support many defense programs, including the FHTV and FMTV programs. We are working on contract extensions for both of these programs with plans to complete the extensions over the next several quarters. We are also the supplier for the Stryker Medium Caliber Weapon System, a program which has contributed to the diversification of our Defense business beyond tactical wheeled vehicles.
And we are in the midst of the Robotic Combat Vehicle development program which demonstrates our broad technical capabilities in autonomy, connected vehicle systems and mobility among others. Finally, I want to share an outstanding technical achievement that our teams recently accomplished with the United States Army. We successfully completed airdrop testing of our low velocity air drop or LVAD FMTV A2 cargo truck at Fort Liberty in North Carolina. Essentially, the program allows the vehicle -- the vehicle to be parachuted from a plane and operational on the ground within 30 minutes. We expect to begin receiving orders for LVAD units in 2025. Let's turn to Slide 6 for a discussion of the Vocational segment. Our Vocational segment delivered strong year-over-year revenue growth in the first quarter of 37% including the benefit of $176 million of sales at AeroTech, which we acquired in the third quarter of 2023.
We continue to invest in electrification programs as well as autonomous functionality to enhance ease of use and productivity for our customers. Given strong demand for fire trucks and our extended backlog, production throughput continues to be a meaningful opportunity for the foreseeable future. Demand remains solid for our McNeilus refuse and recycling collection vehicles. Customers are enthusiastic for our purpose-built electric Volterra ZSL zero-emission vehicles and test vehicles are performing well in the field. As you know, we will be ramping up production of these units at our factory in Murfreesboro, Tennessee. And earlier this month, we completed our first preproduction pilot unit in the facility, representing an important program milestone Customers are excited by the opportunity to reduce their carbon footprint while realizing an estimated 14% improvement in total cost of ownership.
We look forward to the WasteExpo show in 2 weeks where we will showcase these game-changing vehicles and their key features. Moving to AeroTech. We're pleased with our integration progress to date and the business is performing well. Strong financial performance, robust customer demand and exciting new products like the AmpCart mobile charging station, which supports sustainable operations at airports, all highlight the reasons we are so pleased with this acquisition. With that, I'm going to turn it over to Mike to discuss our results in more detail and our updated expectations for 2024.
Michael Pack: Thanks, John. Please turn to Slide 7. Consolidated sales for the first quarter were $2.54 billion, an increase of $276 million or 12.2% over the prior year quarter. The increase was driven primarily by the benefit of $176 million of AeroTech sales in the Vocational segment as well as increased volume in all 3 segments and the benefits of improved pricing. Adjusted operating income increased $124 million over the prior year quarter to $275 million or 10.8% of sales, a 410 basis point improvement versus the prior year. The improvement in adjusted operating income was largely driven by improved price cost dynamics, favorable mix, increased volume and the benefit of AeroTech results. Adjusted operating income exceeded our most recent expectations primarily due to higher volume at Vocational, favorable customer mix at Access and lower spending.
Adjusted earnings per share was $2.89 in the first quarter versus $1.63 in the prior year. During the quarter, we repurchased approximately 130,000 shares of common stock for a total of $15 million. Please turn to Slide 8 for a review of our updated expectations for 2024. With our strong start to the year, we are revising our full year outlook. On a consolidated basis, we are estimating 2024 sales and adjusted operating income to be in the range of $10.7 billion and $1.075 billion, respectively, which are up from our prior expectations of $10.4 billion and $990 million, respectively. We are estimating adjusted earnings per share will be in the range of $11.25 versus our prior estimate of $10.25. At a segment level, we are estimating Access sales and adjusted operating margin to be in the range of $5.4 billion and 15.5%, respectively, up from our prior expectations of $5.2 billion and 15% due to improved production throughput and improved sales mix.
Compared to the first quarter, we expect customer mix to moderate new product development spending to increase for the remaining quarters in 2024. Turning to Defense. We continue to expect sales of approximately $2.1 billion and an adjusted operating margin of approximately 2.5%. We expect Vocational sales and adjusted operating margin will be in the range of $3.2 billion and 11.5%, respectively, up from our prior expectations of $3.1 billion and 11%, respectively. Increased chassis availability and improved price cost dynamics are contributing to the improved outlook. Our estimate of corporate expenses is approximately $190 million, an increase of $10 million versus prior expectations as a result of higher incentive and stock-based compensation expense versus previous expectations.
Our expectation for tax rate is now 24%, a modest decrease versus our prior expectations of 24.5%. Our expectation for share count is now 65.8 million shares. And finally, our expectations for CapEx and free cash flow remain unchanged. Looking to the second quarter, we expect adjusted EPS in the range of $3 per share, which is up versus the prior year and the first quarter. We expect sales to be up approximately 15% versus the prior year, inclusive of the benefit of AeroTech sales. With that, I'll turn it back over to John now for some closing comments.
John Pfeifer: We continue to focus on execution, supporting our customers and empowering our people as we grow and strengthen our business. We raised our expectations and now believe we can achieve our Investor Day targets for 2025 revenue and EPS, 1 year earlier than we originally expected, which is a testament to our team and our strategy. We are investing in new products and deploying technologies that support our customers and keep our company at the forefront as leaders in our industries. This is an exciting time for Oshkosh, and we look forward to continuing to execute our growth strategy to drive shareholder value. All right, Pat, let's get started with the Q&A.
A - Patrick Davidson: Thanks, John. [Operator Instructions]. Operator, please begin the question-and-answer period of this call.
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