オシュコシュ（OSK）2026年第3四半期決算説明会：消防車事業の混乱が見通しの重荷に

主要ポイント

• オシュコシュの2026年第3四半期売上高は28億ドルで前年同期比5.7%増となり、調整後EPSは2.41ドルでした。経営陣は売上高・利益ともに会社予想を下回ったと説明しました。
• 消防車の製造混乱が引き続き最大の制約要因となりました。ヴォケーショナル部門の売上高は9億ドルに減少し、消防車の生産・出荷台数は前年同期を約20%下回りました。
• アクセス・エキップメント部門の売上高は21%増の13億ドルとなり、調整後営業利益率は11.2%を記録しました。四半期受注高は20億ドルに達し、受注残高は27億ドルに拡大しました。
• 経営陣は2026年の調整後EPS見通しを8.50ドル〜9.50ドルに修正しました。下限値は、次回のNGDV発注が2026年末までではなく2027年にずれ込むことを想定しています。
• 通期のフリーキャッシュフロー見通しは、顧客からの前受金や在庫管理に支えられ、5,000万ドル引き上げられて6億ドル〜7億ドルとなりました。
• 経営陣は、生産の安定化が成功することを前提に、消防車生産台数の25%〜30%の改善やヴォケーショナル部門の営業利益率16%〜18%への復帰を含む2028年目標を維持しました。

主要財務データ

事業および業績の動向

消防車の生産制限がヴォケーショナル部門の業績を圧迫

同社は今四半期の主な業績未達の原因として、ピアース（Pierce）消防車の生産を労働集約型の組み立てから高フロー製造へ移行したことを挙げました。自社製造の車両専用部品数千個のルーティングにおいて予想以上のばらつきが発生し、生産量および出荷台数が低下しました。

同社は製造部門のマネジメント層を補強し、部品追跡のデジタル化、バーコードに基づくルーティングの導入、および使用現場への配送改善を実施しています。経営陣は混乱を最小限に抑えるため、既存の最終組み立て作業と並行して新しい高フローラインを段階的に拡大する計画です。

経営陣は生産が2026年第4四半期中に安定し、2027年には約10%増加すると見込んでいます。また、2028年までに25%〜30%の改善を目標とし続けています。

ごみ収集およびリサイクル機器の需要には初期の回復の兆しが見られます。受注残高は前年と同水準に戻りましたが、経営陣はこの改善を肯定的ながら緩やかなものと評価しています。

アクセス部門の需要が拡大

アクセス・エキップメント部門は、北米での販売数量増加、価格改善、製造効率の向上により好調でした。一部の大型全国系レンタル会社からの2027年初頭の年間発注に支えられ、同部門は1.5のBBレシオを記録しました。

経営陣によると、需要はデータセンターや発電施設などの大規模インフラおよびメガプロジェクトに集中したままです。独立系レンタル会社の動きは概ね横ばいで、地域によりばらつきがありました。

第3四半期の価格・コスト動向は、価格改定の上昇分が関税コストの増加をほぼ相殺したため、概ねトントン（ニュートラル）でした。経営陣は、販売数量の回復に伴いアクセス部門の限界利益率が約30%台に達する可能性があると述べましたが、2027年の正式な業績見通しはまだ発表していないと強調しました。

NGDVの立ち上げは引き続き供給制約を受ける

トランスポート部門の業績は、NGDVの生産増加を反映したものの、防衛部門の数量減や前年同期に計上された2,500万ドルのJLTV知的財産ライセンス収入の剥落によって相殺されました。

経営陣は、NGDVの生産が2026年第4四半期に年換算で1万6,000台〜2万台のペースに達し、2027年半ば頃にはその上限に達すると見込んでいます。重要サプライヤーが引き続きボトルネック要因となっており、オシュコシュは生産の安定性を高めるために在庫バッファーを追加しています。

新たなFMTVおよびFHTV防衛契約の生産が本格化しており、これらには物価スライド（経済価格調整）条項が含まれています。経営陣は、新契約に基づく生産が2029年まで続くと見込んでいます。

経営陣の見通し

期待されるNGDVの追加発注は、年内に獲得できれば第4四半期の利益に最大で約4,000万ドル（1株当たり0.50ドル）貢献する可能性があります。経営陣は、発注時期が2026年の生産やキャッシュフローに影響を与えることはないと述べています。調整後EPS見通しの下限値は、受注時期が2027年にずれ込むことを前提としています。

リスクと注目点

• 消防車の生産ペースはまだ目標レートで安定しておらず、部品フローの複雑化により移行期間が延びる可能性があります。
• 追加の供給バッファーが構築されるまで、NGDVの生産量は重要サプライヤーに依存し続けます。
• 次回のUSPS向けNGDV発注の時期は、2026年の調整後EPS見通しレンジ内で最大1株当たり0.50ドルの不確実性を生じさせています。
• 関税、鋼材価格、原材料インフレ、および貨物運賃コストは、特にアクセス・エキップメント部門において引き続き変動リスク要因です。
• アクセス部門の需要は依然としてメガプロジェクトが主導しており、より広範な民間非住宅建設および独立系レンタルの動向は比較的横ばいにとどまっています。
• ごみ収集およびリサイクル関連の受注は改善していますが、経営陣はこれを急速な回復とはまだ見ていません。

アナリスト質疑応答の要点

• 消防車の生産回復：経営陣は、現在のボトルネックは製品利益率ではなく資材フローにあると述べました。生産量は第4四半期に第2四半期の水準に向けて回復し、その後2027年にかけて段階的に改善する見込みです。
• 2028年目標：オシュコシュは2028年の目標期日を繰り下げていません。目標達成は、消防車のスループット向上、NGDVのフル稼働生産、アクセス部門の持続的成長、および新規防衛契約の採算性向上にかかっています。
• ヴォケーショナル部門の利益率：経営陣は、消防車の生産改善とごみ収集事業の安定化に伴い、利益率が16%台に向けて回復すると見込んでいます。同社の2028年ヴォケーショナル部門目標は16%〜18%を維持しています。
• NGDV発注：経営陣は、USPSからの追加発注について獲得可能性ではなくタイミングの問題であると説明しましたが、年末以降にずれ込む可能性があることも認めました。
• アクセス部門の収益性：受注残高の拡大により、生産の見通し、購買効率、コスト計画の精度が向上しています。経営陣は良好な限界利益率を期待していますが、2027年の詳細な業績見通しは後日提示するとしています。
• トランスポート部門の利益率：経営陣は、政府契約事業として妥当な範囲内である2028年に約10%の利益率を引き続き目標としています。

決算説明会文字起こし全文

決算説明会の完全なトランスクリプト

経営陣による説明

Operator

Greetings, and welcome to the Oshkosh Corporation 2026 Third Quarter Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Pat Davidson, Senior Vice President of Investor Relations. Thank you, sir. You may begin.

Patrick Davidson

Good morning, and thanks for joining us. Earlier today, we published our third quarter 2026 results. A copy of that release is available on our website at oshkoshcorp.com. Today's call is being webcast and is accompanied by a slide presentation, which includes a reconciliation of GAAP to non-GAAP financial measures that we will use during this call and is also available on our website. The audio replay and slide presentation will be available on our website for approximately 12 months. Please refer now to Slide 2 of that presentation.

Our remarks that follow, including answers to your questions, contain statements that we believe to be forward-looking statements in the meaning of the Private Securities Litigation Reform Act. These forward-looking statements are subject to risks and other factors that could cause actual results to be materially different from those expressed or implied by such forward-looking statements. These factors -- these risks and factors include, among others, factors that we listed in our release this morning, and matters that we have described in our most recent Form 10-K and other filings we make with the SEC as well as matters noted at our Investor Day in June 2025.

We disclaim any obligation to update these forward-looking statements, which may not be updated until our next quarterly earnings conference call, if at all. Our presenters today are John Pfeifer, President and Chief Executive Officer, and Matt Field, Executive Vice President and Chief Financial Officer. Please turn to Slide 3, and I'll turn it over to you, John.

John Pfeifer

Good morning, everyone, and thank you for joining us today. Our third quarter 2026 consolidated sales of $2.8 billion and adjusted earnings per share of $2.41 fell short of our expectations. This shortfall and our revised full year outlook primarily reflect near-term challenges as we transform fire truck production. is the #1 fire truck brand in America with strong demand in a multiyear backlog. To meet this demand, we are transforming production from traditional labor-intensive assembly processes to more efficient, high flow production lines.

The long-term benefits of this are clear, supporting our customers by delivering more fire trucks to firehouses sooner while delivering a more resilient and flexible production system that results in improved returns for shareholders. When we spoke last quarter, we had made specific improvements in production bottlenecks to support throughput, and we're in the early stages of converting portions of our production to support high flow manufacturing processes. At that time, we identified inefficiencies around our parts flow. As a reminder, custom firetrucks are manufactured using thousands of parts, many are unique and fabricated internally.

During the third quarter, the routing of these parts led to greater production variability than we expected, resulting in lower fire truck production and deliveries. We are actively addressing these issues by improving material tracking for internally fabricated parts and point-of-use delivery, stabilizing the processes that support our manufacturing improvements and adding experienced manufacturing leadership to support the transformation. While our production has not yet stabilized at the higher rates we are targeting, we have a clear understanding of material flow and production challenges that need to be resolved.

We are taking our learnings from the last few months into our future planning where we will slowly ramp up our new high flow lines in parallel with our existing final assembly operations to mitigate potential disruptions. Once implemented, we expect to see stable production levels at about 10% above last year. We still expect our high-flow production lines to deliver the additional fire truck volume that achieves the 25% to 30% growth through 2028 that we discussed at our Investor Day last year. As a result of our revised near-term expectations for fire truck production, we are updating our outlook for 2026.

We now expect full year adjusted earnings per share in the range of $8.50 to $9.50 with potential timing of the next NGDV order also figuring into this range. Matt will go into this into more specifics in his section. Across the company, we see strong demand for our products driven by positive macro trends and as reflected in our backlogs, this is especially true for fire trucks and airport products in our vocational segment, and we saw orders recover during the quarter for refuse and recycling vehicles which is a positive indicator for that business. We also see strong demand for our access equipment to support mega projects, as you have seen in CapEx announcements from key customers.

Lastly, we have multiyear contracts for both defense and delivery customers in our Transport segment. We believe that these indicators of strong demand for Oshkosh products provide a solid foundation for our businesses going into 2027 and provide excellent visibility for the near future. Please turn to Slide 5, and we will review some highlights since our last call. Market conditions for the access segment continued to show improvement as the segment delivered another quarter of double-digit operating income margins with strong third quarter sales. As we discussed on the last earnings call, large infrastructure investments and mega projects led by data centers and data center-related bites are important drivers of demand. Sales in the quarter continued to be led by national rental companies as expected. We have good visibility for the final quarter of 2026 and into 2027, supported by strong orders of $2 billion in the quarter, leading to a $2.7 billion backlog at the end of the quarter.

Demand is clearly evident, and we expect it will underpin growth in the market for the next several years. We remain focused on margin resiliency as we continue to drive cost efficiency and engage in discussions with our major customers around demand trends and pricing. During the quarter, we announced a strategic investment in NextEra robotics. -- another step in advancing our vision for shaping the job site of the future. Nextera combines visual artificial intelligence, autonomous robotics and digital mapping to provide customers with greater ability in the project progress, quality and safety across an active construction site. We believe Nextera's capabilities complement JLG's connected equipment and smart fleet technologies. This puts JLG in a position to extend its value proposition beyond individual machines to the broader job site.

We will work with NextEra on customer engagement, field validation and future applications continue investing in advanced technologies that can improve safety and productivity for our customers. We look forward to sharing more with you on our journey for connected autonomous products at CES next January. Turning to Slide 6 in our vocational segment. As I discussed earlier, vocational results did not meet our expectations, reflecting fire truck production challenges. Elsewhere in vocational, we are encouraged by signs that demand for refuse and recycling vehicles is beginning to recover as customers plan their 2027 fleets. We are starting to see fleets generally returning to their normal order timing as we book solid orders with several key fleet customers in the quarter. These orders provide encouraging evidence that the market will improve as we move into next year.

With the college football season in full swing, the delivery of our fully integrated electric McNelis Volterra front loader to the University of Tennessee, is a good representation of how the quality and performance of our products continues to win over customers as we are seeing with 2027 orders. In September, our Oshkosh airport products business received an order from the U.S. Air Force for 34 Stryker 6x6 aircraft rescue and firefighting vehicles. with initial deliveries expected later this year. This order builds on our long-standing relationship with the United States military and reflects the trust our customers have in our advanced firefighting technology and purpose-built vehicles protect personnel, aircraft and critical infrastructure.

Finally, demand at Oshkosh AeroTech remains strong as airports continue to invest in infrastructure and modernization. Our investments in Gateway passenger boarding bridge production are expected to increase our output in 2027 to support that demand while we leverage 80/20 simplification principles to drive operational improvements across our GSE business. Overall, the long-term outlook for our vocational segment is positive. The actions we have taken, the leadership we have added, the progress we are seeing will position the segment stronger performance in 2027. Please turn to Slide 7. In the transport segment, we believe we have built the foundation for a strong finish to 2026 and a solid start to 2027. During the quarter, we welcomed officials from the Department of Ward to Oshkosh as part of the arsenal Freedom tour, highlighting the strength of our people, advanced manufacturing capabilities and industrial capacity.

Our defense business benefits from the scale, technology and manufacturing expertise of the broader Oshkosh enterprise, including proven commercial production systems, mature supply chains and the ability to respond quickly customer requirements evolve. That combination of commercial capability and defense expertise positions Oshkosh well to support the long-term needs of the United States military and Allied forces. Two weeks ago, at the AUSA trade show in Washington, D.C., we again showcased how the commercial strength of Oshkosh supports our war fighters. Our team met with key domestic and international customers who are important for our success in the segment over the next several years.

One of these international customers, the Royal Moroccan Armed Forces placed a follow-on order for HET A1 tractors and trailers earlier this month. This order building on the deliveries that began in 2025 is a great example of how success of our units in the field results in winning additional business with our allies. Turning to delivery. We're continuing to ship more NGDV to the United States Postal Service and fielded units have now achieved more than 60 million miles on the road.

We saw modest improvement in production sequentially from Q2 to Q3 and continue to work through our production ramp where key suppliers are a gating factor. We are investing in additional supply buffers that we expect will mitigate bottlenecks and normalized production by the middle of 2027. In summary, our backlogs are robust continue to see evidence of long-term demand across each of our segments, demonstrating the strength of our value proposition, our leadership position in resilient, high-growth markets and our ability to deliver for customers.

Now I'll hand it over to Matt to review our financial results and provide additional details on our outlook.

Matthew Field

Thanks, John. Please turn to Slide 8. Consolidated sales for the third quarter of $2.8 billion increased $153 million or 5.7% compared with the same quarter last year. The increase primarily reflected improved sales volume in the access segment and improved pricing in all 3 segments, offset by lower sales volume in the vocational segment resulting from production challenges. Adjusted operating income was $217 million, down $57 million from the prior year, primarily due to unfavorable mix and higher SG&A expenses. These were partially offset by the higher overall sales volume and improved price cost dynamics. Free cash flow continued to be robust in the quarter as we achieved $275 million bringing our year-to-date free cash flow to $433 million.

Our strong free cash flow reflected our continued discipline in managing working capital, particularly related to higher customer advances and improved inventory management. During the third quarter, we repurchased approximately 556,000 shares of our stock for $82 million. This month, Moody's upgraded our credit rating to Baa2, reflecting the resilience of our company and strength of our balance sheet. Turning to our segment results on Slide 9. Access third quarter sales of $1.3 billion were up 21% from last year. The increase was driven by higher sales volume in North America and improved pricing. As John mentioned, market conditions showed continued improvement. We delivered a book-to-bill ratio of 1.5 during the quarter, significantly higher than the third quarter last year.

Orders in the quarter included early receipt of 2027 annual purchase orders from select NRCs and follow strong activity in the first half of the year. Axis achieved a double-digit adjusted operating income margin of 11.2%, a 20 basis point improvement over last year. The increase reflected improved manufacturing efficiencies on higher volume offset in part by adverse sales mix and higher incentive compensation. The solid adjusted OI margin also reflected roughly neutral price cost with improved pricing, largely offsetting higher tariff costs. Locational sales were $900 million, down $68 million compared with the same quarter last year, primarily due to fire truck volume as a result of the manufacturing challenges discussed earlier. We saw production and shipment volume roughly 20% below what we delivered in the third quarter of last year. Our volume also declined compared with what we achieved in the second quarter.

The vocational team is taking the right actions to improve our production operations, and we expect sequential improvements in the fourth quarter. Refuse and recycling vehicle volume was also lower than last year, consistent with after market conditions we have experienced throughout the year. As John noted in his remarks, we are beginning to see early signs of demand recovery for refuse and recycling vehicle and now expect demand to strengthen heading into '27.

Lower fire truck volume, coupled with higher costs as we execute our manufacturing modernization program at peers, impacted our vocational segment adjusted operating income, which was $102 million, down $49 million from last year, of which a little over $10 million can be attributed to additional spending on production improvement initiatives. Despite the challenges from our production transformation, the vocational segment delivered a resilient adjusted operating income margin of 11.4%.

Transport segment sales decreased $26 million or 4% to $562 million in the quarter. As a reminder, last year's sales included a license of JLTV related intellectual property to the U.S. government for $25 million that did not recur. Increased sales from the ramp-up of NGDV production were offset by lower defense sales volume. Transport segment operating income was $8 million, down $28 million, primarily reflecting the licensing of solar last year. We expect Transoperating margin to improve in the final quarter of 2026, and into 2027 as we continue to transition out of past fixed-price contracts and ramp up in NGDV production. We also continue to expect an additional NGDV order this year. .

Turning to our expectations for 2026 on Slide 10. As John mentioned earlier, we are updating our outlook with full year adjusted EPS now expected to be in the range of $8.50 to $9.50 while our outlook for access demand is improving, we are resetting our expectations for the pace of improvement for firetruck throughput in vocational, as John described earlier in the call. The bottom end of this range reflects the probability that we received the NGDV order in 2027 instead of this year. We now expect consolidated revenues of approximately $11 billion and adjusted operating income of approximately $850 million. For access, we expect full year revenue of $4.8 billion and an adjusted operating income margin of approximately 9 and [indiscernible]. While we are seeing improved demand in production efficiencies, we continue to manage a dynamic external economic and tariff environment that is impacting raw material prices and freight costs, which is reflected in this margin outlook.

For vocational, we expect revenues of approximately $3.7 billion and an adjusted operating income margin of 12.5% as a result of the extended transition of fire truck production to a modern high flow process. Lastly, transport, we are adjusting our full year revenue expectations to be approximately $2.3 billion with an operating income margin of approximately 4%. The revised segment revenue reflects low delivery vehicle production. We also continue to expect to follow-on order from the USPS to be received by year-end. This order could impact our earnings by up to about $40 million or $0.50 per share in the fourth quarter. The timing of this order does not affect production or cash flow for 2026. The low end of our adjusted EPS range of $8.50 to $9.50 reflects this order slipping beyond year-end. On cash flow, I want to complement the operating teams across the company as they have continued to drive cash flow improvements across the quarters. As a result of these efforts, we expect free cash flow of $600 million to $700 million up $50 million from our prior guidance.

With that, I'll turn it back over to John for some closing remarks.

John Pfeifer

Our teams remain focused on improving manufacturing execution at vocational at the same time, we are encouraged by strong demand in access and healthy order activity. We continue to generate strong free cash flow. Our priorities are clear: increased fire truck production continued strengthening performance across our segments and execute to deliver sustainable, profitable growth over time.

I'll turn it back to you, Pat, to get the Q&A started.

Patrick Davidson

Thanks, John. I'd like to remind everyone to please limit your questions to 1 plus a follow-up. Please stay disciplined on your follow-up question. After that follow-up, we ask that you rejoin the queue if you have additional questions. Operator, please begin the Q&A session.

Operator

[Operator Instructions] Our first question comes from the line of Steve Volkmann with Jefferies.

質疑応答

Stephen Volkmann

I just want to sort of dial in a little bit to what's going on in fire, John. Because I think last quarter, we were talking about sort of fixed worker shortage, I think, and some standardized material flow. And this quarter, it seems more and more like you're talking about production flowing scheduling. I'm just trying to figure out, is this the same kind of issue that's getting elongated? Or are you kind of finding additional issues as you work through this?

John Pfeifer

Yes. Thanks for the question, Steve. So let me elaborate a little bit on this topic. I might reiterate a couple of things from my prepared remarks, but essentially, of course, I want to make sure it's understood that we are not satisfied with the disruptions or the pace of improvement that we have seen in fire truck production. Let me explain the overall context of what we're doing and why we're doing it. I think everybody knows, Pierce is the best fire truck brand in America. We've got a multiyear backlog, which is an indicator of how strong the demand is for the product.

So the challenge with this business is our capacity. So if you go back to, say, '23, '24 production rates, that was kind of indicative of what we've been doing for a long time. And those production rates were really insufficient to support today's market. So at that time, in '23, '24, if we needed more units, we'd throw more overtime work at it or something like that, squeak out a few more units, but driving materially higher production throughput consistently certainly takes more than that, and it takes really a modern production system, which is what we are doing right now. We are totally transforming and putting in modern high flow manufacturing into how we make fire trucks.

So changing how a fire truck moves through the plant, it means essentially the root of it right now means changing how thousands of parts reach the production line. We've made a lot of improvement in core process. Bottlenecks have been improved as we've gone through this process. Now it's about material flow on a very complicated product where everyone that comes down the line is a little bit different from the next. So each one has a little bit different bill of materials. We are addressing this by putting in great people who understand high flow manufacturing, digitizing and controlling parts flow down to every single unique part.

And we expect that, that's going to drive stability and meaningful improvement with fire truck production long term. It's really about how fire trucks are produced for the next decade and meeting strong demand for this product, getting fire trucks to firehouses faster and making piece a much, much stronger company. It's been harder than we wanted. Absolutely. It's been harder than we wanted, but we know what we have to do. We've got our arms around it. And we are going to fix this, and it's going to drive much better production as we go into 2027.

Stephen Volkmann

Okay, that's good color, I guess. Maybe just a follow-on -- disciplined follow-on and just your current view on sort of the trajectory of when we kind of get this behind us?

John Pfeifer

Yes. So as we go into Q4, we've got our arms around the material flow issues. We've got a lot of people working on driving specific improvements. We pay attention to that. It's about digitizing every single part. It's about barcodes, it's about routing, it's about location, kind of going into the nitty-gritty, as we get that work done, we're seeing that we're stabilizing production throughout Q4. That's why we put more of a moderated outlook for the year as we stabilize this production. We expect 10% increase in 2027, and we're very confident in that number. And we're very confident that this is going to drive 25% to 30% improvement by 2028, and which has been our objective all along.

Operator

Our next question comes from the line of Mircea Dobre with Baird.

Mircea Dobre

Thank you for the question. I guess my -- I would like to start with transport and with NGDV specifically. The revenue here was essentially flat sequentially. And if I understood correctly, your comments implied that we're not reaching full rate production until mid-2027. So maybe you can clarify all of this a little bit more what's really going on here? And what's kind of holding you back from reaching that full rate production? .

Matthew Field

And I hope you enjoyed the brewers one last night. So in terms of transport -- yes, good series. All right. In terms of transport quarter-over-quarter, what you're seeing is some higher production we did achieve higher rates. We stabilized at those rates in the third quarter. On a quarter-over-quarter basis, what's offsetting that is some of the lumpiness that you see in this type of operations. So we had the we had the onetime contract adjustment in the second quarter. And this time, we had some CCAs. But underlying this is higher production rates in the third quarter. We expect that to continue to improve in the fourth quarter at which time we'll see kind of that normative range of, call it, the 16,000 to 20,000 units we talked about. And then as we talk about getting through these gating issues by midyear, then we would be at the upper end of that range. So we're starting to hit that stride in the 16,000 to 20,000 units annualized. And then middle of next year, we would expect to be at the upper end of that.

John Pfeifer

Yes. So we're moving from the low end to full rate to the high end of full rate over time.

Mircea Dobre

Right. But to clarify, I think I heard you talk about some bottlenecks or something going on in the supply chain itself. Is that a factor? Or am I misunderstanding here?

John Pfeifer

Yes. Sometimes, this is a complicated product. There's a lot of critical suppliers. We've got great suppliers, our household names. And sometimes we have a slowdown because of supply in specific areas of the plant. That's why we're putting more buffers in place in different parts of the plant to make sure we can continue to increase production in a more -- from kind of the low end of full rate to the high end of full rate in a more consistent way.

Operator

Our next question comes from the line of Jerry Revich with Wells Fargo.

Jerry Revich

I wanted to ask on the Arexis equipment outlook, as you folks are engaging in the conversations around 2027. How are you thinking about the underlying pace of inflation and the opportunity to see a normal cyclical margin recovery in that line of business? Do you think we can make up some of the price cost headwinds that we saw this year into '27?

John Pfeifer

Yes. Thanks, Jerry. Thanks for the question. We're -- first of all, we're really encouraged by what we're seeing in our access business right now. You talk about $2 billion of orders. We've got a good line of sight into what's going on. Of course, our price cost is always something that we pay very, very close attention to with the dynamic market that we're in on input costs. We will be price/cost neutral this year or a little bit better than that. So we're keeping pace with it. And we're confident that we're going to drive healthy incrementals as this business continues to recover. Healthy incrementals for JLG, I think, as you know, is 30%-ish range.

So we'll drive good incremental. I'll say, as we are in a dynamic market with steel prices and freight and things we pay attention to that, and we pay attention to how we have to pass those costs on if we cannot mitigate them through our total cost management efforts, which are pretty good. We've got really good total cost management efforts. We don't want to pass along costs that don't need to be. But when we do have to, then we will have to pass along some thoughts.

Jerry Revich

Super, John. And then in terms of -- on the fire trucks, just to expand on the comments there, you folks maybe years ago worked down build rates and then built them back up at significantly higher margin. And you took, I think at the time about 18 months to do that here, we're talking about a much faster time line. Can you just compare and contrast the environment then? And way you folks are running now and the level of confidence of a big step-up in margins that's implied by the guide in 4Q?

John Pfeifer

Yes, sure. There is no -- there is not a margin problem with our fire truck business really absorption and getting the units through the line right now as we transition to a totally new modern production line. So if you go back -- I wasn't here 15 years ago. 15 years ago, though, we were building trucks the same way we were in '23 and '24 kind of a slow-moving bay build type production with a lot of tribal knowledge in the manufacturing operations, which is okay, if you've got a market that's in very steady state, slow growth mode.

But as we've seen this market continue to develop, we realized we had to drive a totally different throughput for these products, better efficiency, and that's why we've transformed it this time. So I think 15 years ago, it was more about simplification of the product, 80-20 principles. Today, it's about high flow manufacturing.

Unknown Executive

Just building on your comment on Q4. Thanks, John. is we would expect a margin step up relative to Q3 as we see sequential production rates more consistent with maybe what we would have seen in Q2 as we stabilize production.

Operator

Our next question comes from the line of David Raso with Evercore ISI.

David Raso

Regarding the vocational fourth quarter implied margin, just curious how you're thinking about that. Obviously, the bigger picture is the 2028 guide now that the numbers this year are around it feels like a bit of a stretch. But I'm just trying to understand where your head is on how quickly the vocational margins could step up from this fourth quarter number? Because even the fourth quarter number to be fair, I think people lost a little bit of confidence in saying sequentially, it's going to get better and it doesn't happen. And I'm just trying to understand the credibility around that. The fourth quarter margin is obviously lower than we would have hoped to start the year.

But it is up sequentially if you get that revenue sequential increase. How do we frame that? Just -- I know you don't want to give '27 guidance, but just given it's been a problem now for a few quarters. I think we'd really appreciate some thoughts around when you to the margins at like $1.1 billion, $1.2 billion vocational revenues a quarter, not even the $1 billion in the fourth quarter, definitely not the $900 million in the third quarter. How should we think about that margin level? Because we started the year at 17%, right? And I'm just trying to -- that's a wide gap, and we're just trying to get our head around it.

Matthew Field

Yes. Fair question. Thanks, David. So if you look back last year, last year, we had a full year margin for vocational, almost 16%. That in the third quarter last year, it was about 15.5%. Fourth quarter was a little bit over $16 million. So very strong performance out of vocational. This quarter certainly was a step back at 11.4%, and that was also down relative to the second quarter at about 13% -- 13.5%. And so as we look into the fourth quarter and into 2027, the way we really think about this is by stabilizing production, we'll get back to the levels of production we had earlier in the year. And as I said on the call, in the third quarter, we actually had production take a step backwards, both year-over-year and quarter-over-quarter, which is moderately when you're in a production plant but reflects the disruption and level of parts flow that we saw in the third quarter.

So getting back to those Q2 levels and then moving forward from there at a stable rate is what we expect would deliver those rates. As you look into 2027, we see one refuse stability to increase production, as we talked about on the call in fire truck, more gradual than maybe what we would have thought at one point, but still a healthy rate. And then -- if you look at this in context historically, our guide for vocational at 12.5% is still a strong, robust business on a historic context, not where we would have liked it to be this year. And certainly, we expect to take a step forward next year. And we feel quite comfortable that we're on track for 2028 results to get that margin back into that 16% to 18% with the production actions we're taking.

John Pfeifer

Yes, David, our margins go back to where we all expected them to be in the 16% range. It's about fire trucks put and it's about the recovery of our refuse business.

Operator

Our next question comes from the line of Jamie Cook with Truist.

Jamie Cook

I guess just 2 questions for me. And sorry, I've been juggling multiple calls this morning. But John, just given where we are in 2026 in terms of numbers, can you frame your '28 targets out there, what needs to happen for you guys to get there? Or should we just sort of dismiss them? Or is it time to push it up maybe a year because of what's going on with buyer in an emergency right now? And then I guess just my second question, did you guys give an update on your confidence level on the additional award for NGDV and that's all for me.

John Pfeifer

Yes. Let me start with the NGDV award, and then I'll go into our confidence on 2028. So the NGDV award, we're confident we're going to get another order. We've been working on it with the United States Postal Service. It's late October. So the question is, is it going to come before the year? Or is it good to come next year? It's going to come. It's a question of when, not if. So that's why we gave a lot of guidance versus maybe what people had expected because that assumes we don't get anything. And it comes next year.

So -- but there will be another order for NGDV. Let me talk about 2028. We are not pushing out our 2028 targets. We realize that we're a bit lumpy in terms of 1 year to the next recently. It's driven primarily, as we've been talking about by fire truck production. So what has to happen is we've got to see strong throughput in our fire truck operations, and we expect to see that. We're doing all the work that it takes it's been slower than what we had wanted, as you have seen. But we're doing the work required to transform and get the throughput on fire trucks. NGDV will continue to move towards a higher rate of full rate production. It's a big range of what full rate production means.

The orders have to continue to come in for NGDV's access is growing again. You saw a $2 billion order intake in the third quarter. All signs are there's going to be several years of growth in the access market and access will continue to drive margin improvement year-over-year. Their margins are good, but they'll be much, much better over the next couple of years as that business grows. And all the defense contracts, the pricing that's gone into the defense contracts that starts to show itself in Q4 more than it has. These are all that come into play which tell us that we should continue to expect what we -- 2028 as we had guided when we did our Analyst Day.

Operator

Our next question comes from the line of Angel Castillo with Morgan Stanley.

Unknown Analyst

This is actually Stefan Dassitting in for Angel Castillo. Maybe my first one on the refuse demand recovery. You mentioned positive order trends in the quarter and the expectation for refuse stability going into next year. I guess, how much visibility does your current refuse backlog to give you confidence in those comments?

Unknown Executive

So Steven, so certainly seeing our backlog at the same level we were last year after it was at lower levels earlier in the year. Our conversations with our customers have been more positive in terms of how they're looking at 2027. So that gives me comfort that we're looking at 2027, more like a 2026, if not slightly better. And then we'll kind of take it from there. So I'd say overall positive signs relative to where I was sitting earlier this year, but certainly not off to the races.

Unknown Analyst

And then maybe on access demand going into 2027. We've heard increasingly constructive commentary from the rental companies including higher CapEx budgets. Maybe if you could just give some additional color on how your customer conversations are shaping up for '27. I know you had some really good orders this quarter. And maybe if you could parse out, if any of the strength that you're seeing currently reflects incremental fleet demand being potentially pulled forward from next year at all?

John Pfeifer

Well, thanks for the question. I think that what we're continuing to see is that there are a lot of big mega projects supporting data centers, supporting power gen, supporting other things that are happening that typically get indexed towards the national rental companies, the customers that we serve. And they see this demand continuing for a long time.

If you just look at what's been financed and what's been kicked off that last multiple years, when we look at the market of there's stability in the private nonres area of the market, but that's not really growing very much. It's still primarily a megaproject driven market. So when the private nonres stuff, that starts to grow, that will be incrementally good news to us versus what we're seeing right now with the nationals. But -- but today, it's really driven by all the big projects that we all read about every single day in the newspaper.

Operator

Our next question comes from the line of Tami Zakaria with JPMorgan.

Tami Zakaria

My first question is about NGDV. I think I heard you say you would reach the high end of the 16, 000 to 20,000 production range after 2Q next year, if I heard it correctly. So what level of operating margin [indiscernible] do you expect at that level of production, do you still expect and NGDV margins reach high single-digit to low double-digit percent range when the ramp is done.

Matthew Field

Tami, so I would think about it midyear, no specific exact date. So as John mentioned, we're installing buffers, which improved the flow of the plant when you have suppliers gating here and there. So it gives us more production stability. In terms of operating margin, we're not going to get into the specifics of how we see operating margin, let's say, in the near term. But I would say for 2028, which is really where we've historically talked, it's in that 10% range. Traditionally, government contracting is 7% to 13%. So it's in the healthy range is our expectation over the next couple of years.

Tami Zakaria

Understood. That's very helpful. And then regarding fire trucks, do you plan to reprice some of the backlog given that there's new information about noncompliance penalties possible next year for NOx regulations or did those orders already have escalators such that you wouldn't have to go back and reprice and I would just pass through.

Unknown Executive

Thanks for the question. So in terms of how the NOx and engines work obviously, we've scheduled our vehicles and work with our customers very closely in terms of what engines are installed in those vehicles. So we don't expect any material impact on how we how we price our vehicles from that. We work with a customer and customer basis based on what engine is installed into those vehicles.

Operator

Our next question comes from the line of Menges with Citi.

Kyle Menges

I wanted to follow up on your comments on still expecting 30-ish percent incremental margins in access in this up cycle. And maybe I would just like to hear what's giving you confidence in that -- is it maybe partially on some easy comps as you're lapping some negative price cost and tariff impacts. And it sounds like maybe you've got each of your comps going into next year on incentive comp and access.

I'm curious if there's anything and whether it's in the recent orders or conversations you're having with customers going into '27 that's giving you some confidence in getting to that 30% incremental and maybe how to think if at all, it's mix might play a role in getting to that sort of incremental margin if NRCs are continuing to drive the demand in '27?

Matthew Field

Yes, Kyle, thanks for the question. So the 30% John cited, really, that's kind of a broad brush brush stroke as to what we would historically see from that business. As you think about scoping 2027, and let me just first off, be responsible for me not to say we're not providing any 2027 guidance at this point. But if you think about how to scope 2027, really, with this level of demand and these level of orders, we should get better production issues, more throughput those drive better operating performance that result in those sort of incrementals.

We do have better year-over-year comps as you cite, both from a cost basis as we've seen a more stable tariff environment, but also from flow through pricing, flow through material cost reductions we've had this year. And then lastly, there are some onetime lumpy things, as you say, like incentive comp, which has come back to normal levels this year relative to last year that also would contribute to those incrementals. But the team is laser-focused on driving price cost and driving positive incrementals. And so that 30% broad brush stroke, we'll have more specifics when we get into our 2027 guidance early next year.

Operator

Our next question comes from the line of Tim Thein with Raymond James.

Unknown Analyst

Just to follow up on access. I'm just thinking about the ramifications of given -- of the strong orders that you've received and obviously, the backlog level that you sit at today, as you've -- as more of those big nationals have pulled forward some of those APOs. how is that -- does that give you more -- obviously, gives you more visibility, but are there implications in terms of you being able to kind of hedge and predict your cost base better just given that level of order that's in backlog.

So I guess that's part of the question is, does it afford you greater ability to lock in more of your raw material purchases such that you're able to kind of better match that price cost? And then I guess the offsetting to that is to the extent it is more fill nationals at least today is that and obviously, there's more time to go to fill those orders in, but are we looking at a year potentially where there's that laborable mix next year? Again, to the extent the market continues to be dominated by these mega projects. So I'll just ask one. That's just one long question.

Matthew Field

So let me start, Tim, with some of the specifics, I'll hand it off to John for some of the color on NRCs in the long term. So we are encouraged by the level of orders. It does give us production stability and an outlook that we can manage our plants in a more consistent and optimal way. That makes the manufacturing team super happy, and it drives cost efficiency. There are instances where we can also schedule our buys and kind of cluster things to make sure we're optimal on the order and quantities and so forth to give us cost efficiencies. So it is helpful from a, call it, price cost planning standpoint for 2027 to have this.

I'll hand it off to John about kind of how we think about mix and demand overall.

John Pfeifer

Yes. I mean, First of all, we -- up to this point in time and going into the third quarter when we had these orders, we've had our pricing discussions with our customers. And that's in light of the volatile market for input costs that we're in. So we think that we've done some good work there together with our customers. We, of course, take cost out through a lot of work that we've done from tariff engineering to sourcing and other total cost management efforts.

And as we continue -- so we got a $2.7 billion backlog as we continue through this, so there's more volatility, then we'll have to reopen the discussions with our customers. But we think we've done a nice job of covering ourselves as we go forward. And we'll maintain our diligence there with our customers. But we feel good about the $2.7 billion backlog. We feel good about our -- we'll certainly deliver it. And we -- and as I said, we should deliver that with healthy incrementals, like JLG typically does as the market starts to come back from a lull, which is what's happening right now.

Operator

Our next question comes from the line of Lauren Sullivan with UPS.

Unknown Analyst

This is Lauren on for Steve Fisher. My first question is on the new defense contracts for FMTV and FHTV. How are those performing so far in light of current inflation?

Matthew Field

Good. So we're building under those contracts. The heavy we started building early this year or really late last year. So that's underway. The mediums were starting to ramp in progressively this year, and then that will progressively be an increasing percentage of our mediums over the course of next year.

And then by 2028, we would expect to be fully building under the new contract on both sides. So overall, production is going well. Orders are showing strong demand and the contract terms are there to support an inflationary environment if, in fact, that's what drives our cost.

John Pfeifer

Yes. Remember, Lauren, these contracts, by the way, will go through '29 in terms of production. They have -- they have economic price adjustment clauses in them that give us some good protection.

Unknown Analyst

Got it. Helpful. And then as you mentioned, a lot of the strength in demand for access equipment is coming from the national rental companies. On the independent side, are you seeing any actual cut back in CapEx? Or is IRC CapEx more flat?

Unknown Executive

Or flattish. It's spotty. There's thousands of independents that we serve -- some are in good markets, depending on regionally where they're located. Some are in good markets. They're indexed to the right end market and construction. Some are in not so good markets. So if you look at the total, that's kind of flattish. We're kind of seeing we haven't yet seen a turn in the kind of private nonres markets outside of the big mega projects.

Operator

We have no further questions at this time. Mr. Davidson, I'd like to turn the floor back over to you for closing comments.

Patrick Davidson

Thanks, Christine, and thanks, everybody, for joining us on the call today. We're attending several conferences in November and December. We look forward to meeting with you there. Take care, and have a great day.

Operator

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.