Oshkosh Corp. 2026 Q3 Earnings Call

Good morning, and thanks for joining us. Earlier today, we published our third quarter 2026 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 our 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 and other factors that could cause actual results to be materially different from those expressed or implied by such forward-looking statements.

These risks and factors include, among others, factors that we listed in our release this morning and matters that we have described in our most recent Form 10-K and other filings we make with the SEC, as well as matters noted at our Investor Day in June 2025. 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 are John Pfeifer, President and Chief Executive Officer, and Matt Field, Executive Vice President and Chief Financial Officer. Please turn to slide 3, and I'll turn it over to you, John.

Good morning, everyone, and thank you for joining us today. Our third quarter 2026 consolidated sales of $2.8 billion and adjusted earnings per share of $2.41 fell short of our expectations. This shortfall and our revised full-year outlook primarily reflect near-term challenges as we transform fire truck production. Pierce is the number one fire truck brand in America, with strong demand and a multi-year backlog. To meet this demand, we are transforming production from traditional labor-intensive assembly processes to more efficient, high-flow production lines. The long-term benefits of this are clear: supporting our customers by delivering more fire trucks to firehouses sooner while delivering a more resilient and flexible production system that results in improved returns for shareholders.

When we spoke last quarter, we had made specific improvements in production bottlenecks to support throughput and were in the early stages of converting portions of our production to support high-flow manufacturing processes. At that time, we identified inefficiencies around our parts flow. As a reminder, custom fire trucks are manufactured using thousands of parts. Many are unique and fabricated internally. During the third quarter, the routing of these parts led to greater production variability than we expected, resulting in lower fire truck production and deliveries. We are actively addressing these issues by improving material tracking for internally fabricated parts and point-of-use delivery, stabilizing the processes that support our manufacturing improvements, and adding experienced manufacturing leadership to support the transformation.

While our production has not yet stabilized at the higher rates we are targeting, we have a clearer understanding of the material flow and production challenges that need to be resolved. We are taking our learnings from the last few months into our future planning, where we will slowly ramp up our new high-flow lines in parallel with our existing final assembly operations to mitigate potential disruptions. Once implemented, we expect to see stable production levels at about 10% above last year. We still expect our high-flow production lines to deliver the additional fire truck volume that achieves the 25%-30% growth through 2028 that we discussed at our Investor Day last year. As a result of our revised near-term expectations for fire truck production, we are updating our outlook for 2026.

We now expect full-year adjusted earnings per share in the range of $8.50-$9.50, with potential timing of the next NGDV order also figuring into this range. Matt will go into this into more specifics in his section. Across the company, we see strong demand for our products, driven by positive macro trends and as reflected in our backlogs. This is especially true for fire trucks and airport products in our vocational segment. We saw orders recover during the quarter for refuse and recycling vehicles, which is a positive indicator for that business. We also see strong demand for our access equipment to support mega projects, as you have seen in CapEx announcements from key customers. Lastly, we have multi-year contracts for both defense and delivery customers in our transport segment.

We believe that these indicators of strong demand for Oshkosh products provide a solid foundation for our businesses going into 2027 and provide excellent visibility for the near future. Please turn to slide 5, and we will review some highlights since our last call. Market conditions for the access segment continue to show improvement as the segment delivered another quarter of double-digit operating income margins with strong third-quarter sales. As we discussed on the last earnings call, large infrastructure investments and mega projects led by data centers and data center-related activities are important drivers of demand. Sales in the quarter continued to be led by national rental companies as expected. We have good visibility for the final quarter of 2026 and into 2027, supported by strong orders of $2 billion in the quarter, leading to a $2.7 billion backlog at the end of the quarter.

Demand is clearly evident, and we expect it will underpin growth in the market for the next several years. We remain focused on margin resiliency as we continue to drive cost efficiency and engage in discussions with our major customers around demand trends and pricing. During the quarter, we announced a strategic investment in Nextera Robotics, another step in advancing our vision for shaping the job site of the future. Nextera combines visual artificial intelligence, autonomous robotics, and digital mapping to provide customers with greater visibility into project progress, quality, and safety across an active construction site. We believe Nextera's capabilities complement JLG's connected equipment and ClearSky Smart Fleet technologies. This puts JLG in a position to extend its value proposition beyond individual machines to the broader job site.

We will work with Nextera on customer engagement, field validation, and future applications as we continue investing in advanced technologies that can improve safety and productivity for our customers. We look forward to sharing more with you on our journey for connected autonomous products at CES next January. Turning to slide 6 in our vocational segment. As I discussed earlier, vocational results did not meet our expectations, reflecting fire truck production challenges. Elsewhere in vocational, we are encouraged by signs that demand for refuse and recycling vehicles is beginning to recover as customers plan their 2027 fleets. We are starting to see fleets generally returning to their normal order timing as we book solid orders with several key fleet customers in the quarter. These orders provide encouraging evidence that the market will improve as we move into next year.

With the college football season in full swing, the delivery of our fully integrated electric McNeilus Volterra front loader to the University of Tennessee is a good representation of how the quality and performance of our products continues to win over customers, as we are seeing with 2027 orders. In September, our Oshkosh Airport Products business received an order from the U.S. Air Force for 34 Striker 6x6 aircraft rescue and firefighting vehicles, with initial deliveries expected later this year. This order builds on our long-standing relationship with the United States military and reflects the trust our customers have in our advanced firefighting technology and purpose-built vehicles to protect personnel, aircraft, and critical infrastructure. Finally, demand at Oshkosh AeroTech remains strong as airports continue to invest in infrastructure and modernization.

Our investments in Jetway passenger boarding bridge production are expected to increase our output in 2027 to support that demand, while we leverage 80/20 simplification principles to drive operational improvements across our GSE business. Overall, the long-term outlook for our vocational segment is positive. The actions we have taken, the leadership we have added, and the progress we are seeing will position the segment for stronger performance in 2027. Please turn to slide 7. In the transport segment, we believe we have built the foundation for a strong finish to 2026 and a solid start to 2027. During the quarter, we welcomed officials from the Department of War to Oshkosh as part of the Arsenal of Freedom Tour, highlighting the strength of our people, advanced manufacturing capabilities, and industrial capacity.

Our defense business benefits from the scale, technology, and manufacturing expertise of the broader Oshkosh enterprise, including proven commercial production systems, mature supply chains, and the ability to respond quickly as customer requirements evolve. That combination of commercial capability and defense expertise positions Oshkosh well to support the long-term needs of the U.S. military and allied forces. Two weeks ago, at the AUSA trade show in Washington, D.C., we again showcased how the commercial strength of Oshkosh supports our war fighters. Our team met with key domestic and international customers who are important for our success in the segment over the next several years. One of these international customers, the Royal Moroccan Armed Forces, placed a follow-on order for HET A1 tractors and trailers earlier this month.

This order, building on the deliveries that began in 2025, is a great example of how success of our units in the field results in winning additional business with our allies. Turning to delivery, we are continuing to ship more NGDVs to the United States Postal Service, and fielded units have now achieved more than 60 million miles on the road. We saw modest improvement in production sequentially from Q2 to Q3 and continue to work through our production ramp where key suppliers are a gating factor. We are investing in additional supply buffers that we expect will mitigate bottlenecks and normalize production by the middle of 2027. In summary, our backlogs are robust and we continue to see evidence of long-term demand across each of our segments, demonstrating the strength of our value proposition, our leadership position in resilient high growth markets, and our ability to deliver for customers.