OKLAHOMA CITY -- For Oshkosh ( OSK - Get Report), a heavyweight truck maker that has so far failed to secure a big order in the race to supply the government with blast-proof military vehicles, the third time just may be the charm. After twice joining with low-profile partners for the original mine-resistant ambush-protected vehicles competition, Oshkosh has joined forces with a heavy favorite under the even larger MRAP II program. This story is the third installment in TheStreet.com's five-part series examining the top players in the multibillion-dollar MRAP bidding. Last month, Oshkosh announced that it is teaming up with Ceradyne to produce a next-generation MRAP vehicle known as the Bull. The Bull, featuring breakthrough technology developed by military experts at Ideal Innovations, is considered uniquely capable of surviving hits by powerful "explosively formed penetrators." "The lack of a large MRAP order has been somewhat disappointing," BMO Capital Markets analyst Charles Brady wrote earlier this month. "However, the solicitation for MRAP II is now out -- and we believe Oshkosh's partnership with I-3 and Ceradyne to produce the Bull provides Oshkosh with a very viable vehicle." Brady, who liked Oshkosh even before that new opportunity surfaced, has an outperform rating and a $75 price target on the company's stock. His firm has received compensation from Oshkosh for noninvestment banking services over the course of the past year. Oshkosh closed Thursday at $52.50. The stock peaked this year at around $65 a share on July 9, when Oshkosh seemed poised to score a big MRAP award. The Australian media was reporting that Oshkosh would field an order for up to 1,500 Bushmasters -- a Category II MRAP vehicle made by Australia-based Thales and used by Australian forces participating in the global war on terror -- within a matter of days. Oshkosh had previously obtained a license to manufacture the Bushmaster in anticipation of U.S. sales.
By mid-July, however, industry experts reported that plans for the Bushmaster order had been canceled by the U.S. military. "Despite an aggressive marketing campaign, Oshkosh has yet to secure any Bushmaster sales," Forecast International Defense Intelligence Newsletters reported late last month. "Although available evidence indicates that the current production-standard Bushmaster IMV lives up to the contractor's claims, the fact remains that the vehicle has only one minor export sale (to the Netherlands) under its belt." Oshkosh suffered a major setback with its second MRAP offering, a Category I vehicle known as the Alpha, around this same time. Through a partnership with Protected Vehicles -- a private company run by the founder of leading MRAP supplier Force Protection ( FRPT - Get Report) -- Oshkosh had secured an order for 100 Alphas with hopes of selling even more. However, Bloomberg reported last month, the Pentagon found serious problems with the Alpha and decided to reject the vehicle instead. In a letter sent to Oshkosh warning of the problem, Bloomberg reported, the Marines urged Oshkosh to forge a new partnership and use its production capacity to build different MRAP vehicles. The same day that Bloomberg broke news of the Alpha failure, Oshkosh announced its new relationship with Ceradyne. "We surmise OSK is unlikely to pursue further MRAP ... opportunities on its own," Wedbush Morgan Securities analyst Al Kaschalk wrote a few days later. "Rather, we believe any forthcoming contract wins would be awarded based on available capacity to expeditiously manufacture high-quality chassis for third parties." Kaschalk has a hold recommendation and a $67 price target on Oshkosh in the meantime. His firm makes a market in the company's securities. Baird analyst Robert McCarthy feels more upbeat. He has an outperform rating and a $75 price target on Oshkosh 's stock. His firm has investment banking ties to the company. "Oshkosh has not received an MRAP I order but said that it is discussing subcontracting opportunities with contract award winners and is positioning itself to win a prime role on subsequent MRAP-related contracts," McCarthy stressed this month. Even so, "FY08 guidance does not include any contribution from MRAP-type vehicles (but does include some minor expenses) -- leaving potential upside to our defense segment estimates if MRAP-related contracts materialize."