To truck maker Oshkosh Corp.'s (
OSK
) beleaguered shareholders, the 50% share price gain that's
followed Carl Icahn's interest in the company looks like a
blessing indeed. But investors in this for the long-haul -
perhaps those still hoping to recoup an early 2010, or pre-2008
share price - might want to hold their thanks to the great
shareholder activist. Icahn's involvement here could yet be a
curse, just when things were finally getting better.
Icahn's Oshkosh involvement has taken a back seat, in terms of
public notice, to his very recent interest in Netflix (
NFLX
).
Icahn divulged a 9.5% stake in Oshkosh back in October 2011,
one of more worrisome points in the company's post recession
history. Recovery for this $2.57 billion market cap company has
been tortuously slow. Government defense spending usually
accounts for more than half of Oshkosh sales, and that revenue
was down some 39% for the fiscal year. Sales of everything else,
from fire engines to garbage haulers and booms, were down too. It
was no wonder that its share price had tanked, as seen in this
stock chart
.
OSK
data by
YCharts
Icahn contended the company was more valuable broken up and
sold, but Oshkosh shareholders soundly rejected his slate of
board candidates. Late last month, the board also rejected his
$32.50 a share bid, and it adopted a poison pill plan to make a
hostile takeover difficult.
Meanwhile, Oshkosh's numbers dramatically improved. Full-year
earnings released on Oct. 26 beat forecasts with 14% to 32% sales
gains in all non-defense divisions. Operating margins were better
than most forecasts too. Although defense declines continue to
overshadow the niceties everywhere else, the tone is, finally,
quite upbeat.
Oshkosh contends shareholders will get better returns by
cutting costs and capitalizing on an economic recovery expected
to bring more demand for the non-defense products they sell.
They're particularly excited about the nascent recovery in the
homebuilding sector, buyer of its cement trucks and the like,
which already led to a 32% sales gain there.
US Housing Starts
data by
YCharts
The defense division, management contends, is made more
valuable by investing in new products and expanding the customer
base rather than selling it in a slump. Oshkosh makes niche
military products, like vehicles that carry tanks, and its
patented parts for such often give it a competitive edge. The
company is spending in R&D and seeking contracts with foreign
governments.
It's impossible to know which plan will long-term be more
shareholder-profitable, but it's also unclear whether Icahn's
involvement now is a help or a hindrance to a return to a $40
share price. Of course, Icahn-induced takeover speculation helps,
but that ride isn't free. Oshkosh will spend millions fighting
Icahn, and that's money not spent on R&D, marketing and other
things to strengthen the business.
That's not so important if Icahn gets his way with the
split-and-sell strategy. Investors in other companies, like
biotech company Genzyme, have made oodles of money when Icahn did
just that. But his involvement is by no means a guarantee of
success. Dynegy, for example, filed for bankruptcy earlier this
year after an Icahn intervention, as did Lear and Blockbuster in
the past.
There's always the possibility Icahn will lose interest in
Oshkosh, as he has with numerous other companies, and that, too,
might be a mixed blessing. Clorox (
CLX
), for example, held his attention as a break-up target for a few
short months last year. Clorox's share price was basically flat
during his focus, which was decent performance considering the
12% decline in the S&P 500 over that period. Since he backed
off in September, Clorox shares are up about 9%, or half of what
the S&P 500 has delivered.
CLX
data by
YCharts
Somebody there probably misses him.
Dee Gill is a contributing editor at YCharts, which
includes the just-released
YCharts Pro Platinum
for professional investors.