4th of July Gift: Oshkosh Wins At Expense of Others (OSK, NAV, FRPT, GD)

Oshkosh Corp. (NYSE: OSK) shares are rising strongly today while most of its peers are falling, after the company won a massive government contract that market participants are seeing as the sole prize in a billion-dollar sweepstakes.  The ATV vehicle win came at the expense of Navistar International Corp. (NYSE: NAV), which has a joint venture between small-cap Force Protection Inc. (Nasdaq: FRPT) and General Dynamics Corp. (NYSE: GD).  Despite the major share price erosion seen today in the losers, there might still be an outside chance that Oshkosh is not the sole winner.

Shares of Oshkosh are up more than 20 percent on nearly four times normal volume in the first two hours of trading after the company won a $1.06 billion fixed-price contract from the U.S. Army for 2,244 MRAP mine-resistant All-Terrain Vehicles for use in Afghanistan.  The deal has helped to boost the company’s defense business backlog by roughly 40% to $3.4 billion.

The Pentagon could order thousands more of the vehicles. And the win could help the company better compete for business in the Joint Light-Tactical Vehicle program, a potentially larger market segment where it also could take market share from some of its rivals.

Force Protection shares are taking the brunt of the abuse in today’s trading, down more than 35 percent on six times average volume as of 11:30 am. Eastern. Navistar shares are down 3%. BAE Systems (BAESY) also is trading lower after the contract announcement.  One bit of positive news for Force Protection, however, is that it’s possible Oshkosh may partner with one or more of the losing bidders to fill part of its contract requirements.  If that happens, there is history between Oshkosh and Force Protection. The companies are now working together to retrofit Force Protection vehicles with Oshkosh suspension equipment.

Mike Tarsala
July 1, 2009