Stock Pick: Oshkosh Corporation (OSK)

Oshkosh Corporation Truck

Oshkosh Corporation (OSK) is a global leader in manufacturing and marketing heavy duty trucks and truck bodies for military defense, hauling, concrete placement, and fire and emergency rescue. The company was founded in 1917 and has operations in various U.S. states as well as in other countries including the United Kingdom, France, Australia, Canada, China, and Romania. In 2018, the company generated revenues of $7.7 billion. The company has approximately 15,000 employees worldwide.

Technical Analysis of Oshkosh Corporation (OSK)

OSK nosedived after generating an all-time high of $100.26 in January 2018. At the point, the stock was showing corrective signals. We saw a bearish divergence on the weekly chart. On top of that, the weekly candle had a wick above its body to indicate profit-taking.

These signals foreshadowed the nine-month correction that drove OSK to as low as $51.42 in October 2018. Nevertheless, the stock has shown strong signs of recovery since.

Technical analysis reveals that OSK has taken out resistance of $73 in January 2019. This triggered the breakout from an inverse head and shoulders pattern on the weekly chart. The breakout then ignited a rally that sent the stock to as high as $84.86 this month.

The stock may be correcting from the breakout rally but technical indicators lend additional cushion to support of $73. Both the 50 moving average (MA) and 100 MA are crawling close to the $73 price level. They will act as additional supports and help keep OSK trading above $73.

Fundamental Analysis of Oshkosh Corporation (OSK)

In addition to our technical analysis, fundamental analysis also supports our bullish bias.

OSK not only beat expert estimates for the second quarter of fiscal 2019 but the company also increased the fiscal outlook for this year. Nasdaq reported that OSK generated an earnings per share of $1.82 in the second quarter. This is 12.35% higher than the $1.62 EPS projected by Zacks. On top of that, consolidated net sales amounted to $1.99 billion to top the $1.96 billion estimate of Zacks.

The better than expected earnings drove executives to raise guidance for the rest of 2019. OSK forecasts sales of $8.2 – $8.3 billion to indicate an increase from the recently posted $8.05 – $8.25 billion. In addition, diluted EPS was lifted to $7.50 – $7.80 from the earlier projected $7.00 – $7.50.

Also, the stock’s trailing twelve months price to earnings ratio (PE ratio ttm) stands at 10.55. The stock is currently undervalued considering that it has a five-year average of 16.42. If you also take into account that the stock has a five-year maximum of 26.68, it makes sense to build a bias that OSK has some room to grow.

The strategy is to buy on dips as close to $73 as possible. As long as the stock is above this level, bulls will likely gather the momentum to rally to resistance of $95.

The timeline for the target is six months.

Weekly OSK Chart

Monthly OSK Chart

OSK monthly chart

As of this writing, the Oshkosh Corporation stock (OSK) is trading at $78.35.

Summary of Strategy

Buy: As close to $73 as possible.
Target: $95
Stop: $71

 

Disclaimer: The writer does not own shares of Oshkosh Corporation stock (OSK.
Featured image courtesy of Shutterstock.

Kiril is a CFA Charterholder and financial professional with 5+ years of experience in financial writing, analysis and product ownership. He has passed all three CFA exams on first attempt and has a bachelor's degree with a specialty in finance. Kiril’s current focus is on cryptocurrencies and funds, as he does his own crypto research and is a Product Manager at Mitre Media. He also has his personal website, InvestorAcademy.org where he teaches people about the basics of investing. His ultimate goal is to help people with limited knowledge of finance and investments to create investment portfolios easily, and in line with their unique circumstances.