Oshkosh (OSK) Q4 2025: Tariff Impact Rises $160M, Testing Access Margin Resilience
Oshkosh’s Q4 capped a year of double-digit vocational margin gains, but 2026 guidance centers on offsetting a $160 million surge in tariffs, pressuring access equipment profitability and segment mix. Management’s balanced outlook underscores diverging market signals—robust mega-projects and municipal fire demand contrast with private construction softness and near-term refuse moderation. Investors face a 2026 marked by front-loaded cost headwinds, back-half recovery bets, and a multi-year innovation push in robotics and delivery vehicles.
Summary
- Tariff Burden Intensifies: Access segment faces $160 million higher tariffs, driving renewed pricing and cost-out focus.
- Vocational Margin Expansion: Fire and airport products offset refuse softness, supporting segment-leading profitability.
- Back-Half Weighted Recovery: Management expects first-half drag with margin and volume acceleration in late 2026.
Performance Analysis
Oshkosh closed 2025 with consolidated sales of $10.4 billion and adjusted operating income just over $1 billion, reflecting a year of robust execution amid volatile cost and demand environments. Q4 revenue reached $2.7 billion, with an adjusted operating margin of 8.4 percent, as strong access and vocational segment performance was partially offset by unfavorable product mix and higher manufacturing overhead. Notably, vocational delivered 15.8 percent full-year margin, driven by fire apparatus and airport product strength. The access segment, while flat YoY in Q4 sales, absorbed the brunt of tariff costs and product mix headwinds.
Transport segment sales grew to $567 million, with delivery vehicles (notably the Next Generation Delivery Vehicle, NGDV, USPS postal truck contract) now comprising 30 percent of segment revenue. Free cash flow for the year was $618 million, or 96 percent of net income, exceeding guidance and supporting investor day cash conversion targets. Share repurchases more than doubled YoY, totaling $278 million and modestly boosting EPS.
- Access Under Tariff Pressure: Q4 access margin compressed as $20 million in tariffs and adverse mix offset volume gains.
- Vocational Margin Leadership: Fire and airport throughput supported 16.2 percent Q4 margin; refuse vehicle demand moderated.
- Transport Ramps NGDV: Delivery revenue up 13 percent sequentially; margin recovery hinges on contract mix and scale in 2026.
Management’s 2026 guidance calls for $11 billion in sales and $11.50 EPS, with margin improvement weighted to vocational and transport as access volumes and mix adjust to market headwinds and tariff escalation.
Executive Commentary
"Our vision for the airport of the future, the job site of the future, and the neighborhood of the future incorporates robotics, autonomy, AI, connectivity, and electrification, which we highlighted at our booth [CES]. ... We are excited about our next generation products and are confident they will lay the foundation for long-term profitable growth as we transform industries and help our customers achieve their goals."
John Pfeiffer, President and Chief Executive Officer
"Our sales outlook assumes roughly flat non-residential construction activity in line with many external projections. While we expect lower sales in access, we expect to grow both sales and adjusted operating income for the vocational and transport segments. ... The rough magnitude of these tariffs is estimated at $200 million or about $160 million higher than 2025."
Matt Field, Executive Vice President and Chief Financial Officer
Strategic Positioning
1. Tariff Mitigation and Pricing Strategy
Oshkosh faces a $200 million tariff headwind in 2026, with approximately three-quarters falling on the access segment. The company is executing a dual strategy of engineering cost-outs (tariff engineering, re-sourcing, localization) and targeted price increases to maintain margin parity. Management expects to be “whole” on price-cost by year-end, with cost savings initiatives ramping in the back half.
2. Vocational Segment Throughput and Mix
The vocational segment, spanning fire apparatus, refuse, and airport products, is leveraging a $6.6 billion backlog and $150 million in capital investments to improve throughput and reduce lead times. Fire truck deliveries rose nearly 10 percent in the second half, while airport products benefited from long-term infrastructure tailwinds. Refuse vehicle demand is moderating near-term, but AI-powered contamination detection launches in Q1 2026 aim to reignite growth.
3. Access Equipment Navigates Mixed Demand
Access equipment (JLG, aerial work platforms) faces a 6-7 percent revenue decline in 2026 as private non-residential construction remains soft, despite strength in mega-projects and data centers. Orders surged in Q4 as customers pulled forward demand ahead of price hikes, creating a Q1 volume air pocket. Management’s “balanced approach” reflects diverging customer exposures and healthy fleet utilization data, but visibility remains limited on inflection timing.
4. Transport Segment Transformation
Transport’s NGDV ramp is on track, with USPS deliveries exceeding 10 million miles and customer satisfaction high. Delivery vehicles now account for half of segment revenue, with further upside tied to new orders and FMTV (Family of Medium Tactical Vehicles) contract execution. Defense vehicle revenue is lower YoY, but follow-on export orders and new contracts are expected to bolster results in late 2026 and beyond.
5. Innovation and Robotics as Growth Vectors
Oshkosh’s CES showcase signaled a pivot toward robotics, autonomy, and AI-enabled equipment, with award-winning concepts in job site robotics, airport modular robots, and advanced safety systems (CAMS). The company is positioning for a future where equipment not only enables but executes tasks, expanding addressable markets and deepening customer value.
Key Considerations
Oshkosh’s 2026 playbook is defined by tariff navigation, segment mix shifts, and operational execution against a backdrop of mixed end-market signals.
Key Considerations:
- Tariff Pass-Through Execution: Success depends on cost-out pace and customer acceptance of higher prices, especially in access.
- Vocational Backlog Monetization: Fire and airport throughput must accelerate to convert $6.6 billion backlog into revenue and margin expansion.
- Access Volume Recovery: Q1 volume and margin drag risk further downside if private construction softness persists longer than expected.
- Transport Margin Path: NGDV and FMTV scaling are critical to achieving the 10 percent segment margin target by 2028.
- Innovation Commercialization: Robotics and AI launches must translate from CES buzz to real revenue and margin impact over the medium term.
Risks
Oshkosh remains exposed to tariff regime volatility, with $200 million in assumed costs that could shift with policy changes. Private non-residential construction weakness could further pressure access volumes and margins. Execution risk around cost reduction, backlog conversion, and new product launches is elevated, particularly with back-half weighted recovery assumptions. Competitive responses to price increases and innovation pace also pose ongoing threats.
Forward Outlook
For Q1 2026, Oshkosh guided to:
- Adjusted EPS approximately half of Q1 2025, reflecting access volume and cost drag
- Notable margin improvement expected in second half as cost-out and pricing actions gain traction
For full-year 2026, management guided:
- Sales of approximately $11 billion (mid-single digit growth)
- Adjusted EPS of $11.50, up from $10.79 in 2025
- Access and vocational segments each at $4.2 billion sales; transport at $2.5 billion
- Free cash flow of $550 to $650 million (80 percent of net income)
Management highlighted:
- Backlog strength in vocational and transport segments provides multi-year visibility
- Tariff cost offset strategies and cost reductions expected to restore margin by year-end
Takeaways
Oshkosh’s 2026 hinges on its ability to navigate a $160 million tariff increase, with margin and volume recovery dependent on cost-out execution and market stabilization.
- Margin Mix Shift: Vocational and transport segments are set to drive profit growth as access faces near-term headwinds.
- Innovation Optionality: Robotics, AI, and modular platforms offer medium-term growth levers if commercialized successfully.
- Monitor Tariff and Cost Execution: Investors should closely watch access pricing realization and cost reduction cadence, as well as backlog conversion rates in vocational and transport.
Conclusion
Oshkosh enters 2026 with robust vocational and transport tailwinds, but faces a pivotal year for access equipment as tariff escalation tests pricing power and cost agility. The company’s innovation pipeline and backlog strength provide long-term confidence, but near-term execution on margin recovery and backlog monetization will be decisive for valuation and sentiment.
Industry Read-Through
Oshkosh’s experience underscores the intensifying impact of tariffs on North American equipment manufacturers, particularly those with global supply chains and cyclical end-markets. Private construction softness and mega-project divergence are shaping demand visibility and capital allocation across the industrial landscape. The emphasis on robotics, AI, and modular platforms at CES signals an industry-wide pivot toward automation and digitalization, raising the bar for innovation-driven margin expansion. Backlog conversion and cost-out discipline will be critical watchpoints for peers exposed to similar macro and policy risks.