Defense Contracts and AI Innovation Won't Save OSK From Market Headwinds

Oshkosh Corporation (OSK) has been making aggressive moves to position itself for growth. The company’s Defense segment recently captured significant wins, including a $53 million order from the U.S. Army Contracting Command-Detroit Arsenal for Common Bridge Transporters under the Family of Heavy Tactical Vehicle (FHTV) V program, followed by an $89 million award in October for Palletized Load System A2 vehicles. Beyond traditional defense procurement, OSK is doubling down on artificial intelligence, rolling out advanced technologies that combine autonomy, connectivity, electrification and intelligent analytics to serve firefighters, airport personnel, logistics operators and soldiers.

On paper, these are solid strategic initiatives. Yet they mask a troubling reality: the company’s overall business is losing momentum faster than these bright spots can compensate.

The Numbers Tell a Different Story

Look at where it matters most—future sales commitments. Oshkosh’s consolidated backlog dropped to $13.7 billion as of September 2025, down from $14.3 billion a year earlier. The breakdown is stark: Access Equipment carries $721 million, Vocational holds $6.4 billion, and Transport accounts for $6.74 billion. This decline signals weakening demand across the broader portfolio.

The Access Equipment segment is particularly concerning. Orders have softened considerably, with the book-to-bill ratio falling to 0.6 and revenues declining 19% year-over-year. Early signals suggest customers are tightening capital expenditure plans. Used equipment trends remain relatively stable, but the willingness to purchase new equipment is eroding. Rising discounting—now in the 3-4% range—suggests competitive pressure and buyer hesitation. Both independent rental companies and national operators are adopting a wait-and-see stance as tariff uncertainty creates planning obstacles.

Reality Check: Forward Guidance and the Macro Squeeze

The company’s revised 2025 outlook reinforces investor concerns. Oshkosh now projects consolidated sales between $10.3-$10.4 billion, down significantly from the previous guidance of $10.6-$10.75 billion. That’s a year-over-year revenue contraction, a painful admission that demand weakness is real and spreading. Adjusted earnings per share guidance was similarly trimmed to $10.50-$11, compared to the prior $11 estimate.

This isn’t just cyclical softness. Tariff uncertainty, mixed macroeconomic conditions, and customer caution across both the Access and Transport segments are creating a demand environment where buyers are deferring purchases and stretching replacement cycles. OSK is caught in the middle—unable to command pricing power, watching order intake slow, and facing margin pressure from discounting.

Why Strategic Wins Aren’t Enough

Defense contract wins are genuine positives. The FHTV V program awards demonstrate continued government confidence in OSK’s capabilities. AI-driven solutions and advanced technology platforms represent real innovation and could unlock competitive advantages down the road. But here’s the critical gap: these strengths operate in different timeframes than the market’s immediate concerns.

Defense revenues, while growing, remain a smaller piece of the overall business pie. They’re insufficient to offset the deterioration in larger, more economically sensitive segments. AI initiatives and autonomous technology are multi-year bets. They enhance long-term competitive positioning but don’t alter near-term financial performance or backlog trends. Investors facing a year-over-year revenue decline, compressed margins, and slowing orders aren’t going to wait patiently for strategic transformation.

The Investment Verdict

Oshkosh faces a credibility problem. Despite demonstrable strength in Defense and meaningful progress in AI integration, the company cannot escape the gravitational pull of macro headwinds and customer caution. A declining backlog, weakened order book-to-bill, rising discounting, trimmed revenue and earnings guidance, and near-term demand uncertainty create an unfavorable risk-reward setup.

The company currently carries a Zacks Rank #4 (Sell) designation. Until demand stabilizes, backlogs stabilize, and forward guidance reflects sustained rather than declining expectations, OSK remains a problematic entry point for value-conscious investors.