KeyBanc sees Oshkosh OMFV news as significant blow to defense segment visibility

KeyBanc analyst Steve Barger notes that on Monday, the U.S. Army announced its decision to exclude Oshkosh Defense (OSK) and two other competitors from down-selection in its OMFV development program to ultimately replace the M2 Bradley infantry fighting vehicle. The winning bids came from two teams, led by General Dynamics Land Systems (GD) and American Rheinmetall, which will move on to share $1.6B in development funding to continue prototyping and compete for a single winner of a 7-10 year contract worth up to $45B. It is not immediately clear if one or more of the excluded companies will protest the decision, but a U.S. Army spokesperson “anticipates that potentiality,” KeyBanc adds. While the firm thinks this is a clear negative for Oshkosh following a lost recompete for its JLTV program, it believes there are other, smaller Defense programs Oshkosh can bid on. However, KeyBanc thinks this decision as it currently stands is a significant blow to long-term Defense segment visibility, which could prompt Oshkosh to think about strategic options for that business unit.