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Oshkosh vs. Workhorse: Which Delivery Vehicle Manufacturer is a Better Buy?

Oshkosh (OSK) and Workhorse (WKHS) are two companies competing to create electric delivery vehicles. Recently, OSK won a big contract from the USPS, which caused WKHS to plummet? Is OSK still the better buy? Patrick Ryan gives his take below.

This story originally appeared on StockNews
Oshkosh (OSK) and Workhorse (WKHS) are two companies competing to create electric delivery vehicles. Recently, OSK won a big contract from the USPS, which caused WKHS to plummet? Is OSK still the better buy? Patrick Ryan gives his take below.

Oshkosh (OSK) and Workhorse (WKHS) have been in the news of late. WKHS lost out on a contract to make the mail trucks used by the United States Postal Service.

OSK won the contract even though WKHS was considered the favorite to land the deal for several months.OSK is a defense contractor that also makes futuristic delivery vehicles. WKHS is largely focused on “last mile” delivery vehicles that typically top out at 75 miles per hour. However, WKHS also has a drone business that works in tandem with its delivery vehicles.

Is OSK the better play now that the company has beaten out WKHS for the lucrative USPS contract? We answer that question below.

Details About the OSK Contract With USPS

Investors were big fans of WKHS all the way up until a couple of months ago when the USPS selected one of the EV maker's competitors, OSK, to make its delivery trucks. Though some United States lawmakers have urged USPS power brokers to halt the contract, it appears as though it will move forward with OSK being the big winner and WKHS the big loser. All in all, the deal extends a decade into the future during which OSK will make next-generation postal service delivery vehicles.

Most of those who piled their money into WKHS stock were surprised the EV-maker did not receive even a small piece of the contract that totals several billion dollars in aggregate. However, the silver lining is WKHS was one of three finalists, meaning it will likely be considered for future projects in the months and years ahead. Little else is known about the contract as the USPS has provided precious few details and has discouraged executives from the three finalists from discussing the bid process. The decade-long contract starts with an investment of nearly $500 million. OSK will use the money to perfect its USPS vehicle model production. Upwards of 165,000 such vehicles will be made in the decade ahead.

USPS vehicles made by OSK will be designed with fuel-efficient engines or electric powertrains that are battery-powered. It is particularly interesting to note these vehicles will be retrofitted to accommodate improvements in EV technology in the years to come. It is important to note the deal inked between the USPS and OSK is open-ended, meaning USPS can tack on additional money for even more delivery trucks down the line.

OSK Points of Note

OSK makes military vehicles, refuse equipment, severe service equipment, and off-highway equipment. However, OSK executives have recently made it well known the company is willing to produce battery-powered electric vehicles for the USPS. OSK also has a partnership with Ford (F) that has resulted in the electric version of the large Transit vehicle produced in Missouri.

OSK has been on fire across the past six months, jumping from$67 in late October to its current price of $124. The stock was priced at $60 in May of '20. OSK has a forward P/E ratio of 21.20, a fairly reasonable figure considering the stock is priced a mere $2 away from its 52-week high of $126.16.

WKHS Points of Note

WKHS has an EV manufacturing plant that spans more than six million square feet. Though this space will not be used to make USPS vehicles in the next decade, there is a good chance WKHS vehicles will be used by delivery companies of other types. Though WKHS “last mile” vehicles top out around 75 miles per hour, the vast majority of the roads and highways in the United States have speed limits below this rate of speed. Furthermore, WKHS’s EV technology is leased for use in the Lordstown Endurance Class 1 EV pickup truck.

WKHS stock understandably slid after losing the USPS contract. However, the company has also struggled with production startup challenges, coronavirus employee infections, and supply chain issues. WKHS has open orders for several thousands of electric vans yet the company has not proven it can fulfill such orders promptly.

OSK and WKHS According to the Analysts

The analysts are bullish on OSK, establishing an average target price of $128.33. Of the 16 analysts who have issued recommendations for the stock, six consider it a Strong Buy, eight consider it a Buy, and two consider it a Hold.

The analysts are slightly bullish on WKHS. Of the eight analysts who have issued recommendations for the stock, one considers it a Strong Buy, three consider it a Buy and four consider it a Hold.

OSK and WKHS POWR Ratings

OSK has a B POWR Rating grade. The stock has an A grade in the Value component along with a B grade in the Sentiment components. Click here to learn how OSK fares in additional POWR Ratings components such as Quality, Momentum, Stability, and Growth. OSK is ranked 19th of 53 stocks in the Auto sector. You can learn more about the stocks in this sector by clicking here.

WKHS has an F POWR Rating grade. The stock has F grades in the Quality, Stability, and Growth components of the POWR Ratings. Click here to learn more about how WKHS fares in the rest of the POWR Ratings components. Of 53 stocks in the Auto industry, WKHS is ranked 50th. You can learn more about this sector by clicking here.

Which is the Better Play?

OSK is clearly the better play. OSK won the USPS deal, is capable of delivering on its production promises, and has superior POWR Ratings components.

WKHS shares were trading at $12.94 per share on Thursday morning, down $0.09 (-0.69%). Year-to-date, WKHS has declined -34.58%, versus a 12.73% rise in the benchmark S&P 500 index during the same period.

About the Author: Patrick Ryan

Patrick Ryan has more than a dozen years of investing experience with a focus on information technology, consumer and entertainment sectors. In addition to working for StockNews, Patrick has also written for Wealth Authority and Fallon Wealth Management.


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