Industrials Sector

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Industrials Sector

• Andrew Meadows
• Ken Melick
• Jordan Miller

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Summary

• Hold current overweight of 53 bps
• Growth is expected to be higher than market
• Current valuations- neutral

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Current Holdings

• FedEx 3.57
• GE 4.51
• Robert Half International 3.91

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Recommendation

• Hold FedEx and GE
• Sell Robert Half International
• Buy Oshkosh Trucks

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FedEx
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FedEx

• Current Price 93.60
• Target Price 115
• 18.6 Upside

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FedEx
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Robert Half International

• Provider of temporary, full-time, and contract
  employees
• Provides risk consulting and internal auditing
  services

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Valuation
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Valuation
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Robert Half International

• Average of DCF and Absolute Valuations
• 30.00 Due to Economic Conditions more likely
  close to 27.00
• Upside ranges from 12 to 16

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Robert Half International
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Unemployment Risk
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Recommendation

• Risks with the current economy show that the
  stock will continue to fall
• Sell holdings of Robert Half International

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Oshkosh Truck Corp. (OSK)

• Leading manufacturer of specialty vehicles and
  heavy duty trucks
• Target Price 67
• Current Price 46.31

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Defense

• Established supplier to U.S. Department of
  Defense
• Sales up 121 since beginning of Operation Iraqi
  Freedom
• 26 of Revenue, 35 of EBIT

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Defense

• DoD planning a three fold increase in Oshkosh
  produced Heavy Tactical Vehicles to be purchased
  and deployed in 2008
• Significant recapitalization program
• Management expects 20 growth
• Historically underestimated growth

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Access Equipment

• Formed in 2007 with 3 billion acquisition of JLG
  Industries
• Provider of aerial access equipment
• 40 of Revenue, 43 of EBIT

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Access Equipment

• Gives OSK more exposure to rapidly expanding
  international economies
• 33 of Revenue
• Margin expansion opportunity

2007 Sales by Region
2008E Sales by Region
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Fire Emergency

• Produces custom and commercial fire apparatus and
  emergency vehicles including pumpers, ladder
  trucks, rough terrain vehicles and bomb squad
  vehicles
• Market share leader
• 17 of Revenue, 14 of EBIT

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Commercial

• Primarily produces refuse collection vehicles and
  concrete mixers
• Worst performing segment due to weak residential
  construction market
• 17 of Revenue, 8 of EBIT

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Risks

• Reliance on U.S. economy and slowing residential
  construction
• Reduction in spending by U.S. DoD
• Integration of JLG

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Valuation Relative to Sector
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Valuation Multiples Analysis
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Questions