February 24, 2021 12:00 AM, EST

Workhorse Passed Over as Oshkosh Wins USPS EV Contract

USPS' Next Generation Delivery VehicleA view of the Next Generation Delivery Vehicle to be built by Oshkosh Corp. for USPS. (United States Postal Service)

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Electric-vehicle maker Workhorse Group Inc. shares fell on Feb. 24, extending its decline to about 52% in two trading sessions, after losing out on a key contract from the U.S. Postal Service.

Workhorse shares have now wiped out all their gains since late June as the stock dropped 8.1% to $15.13 in New York. It posted its steepest decline in almost a decade on Feb. 23 after a key government contract that some had expected it to win went to rival Oshkosh Corp. instead. The shares later pared some of the losses to close down 8.1% on Feb. 24.

The news came as a “shock,” Cowen analyst Jeffrey Osborne said. While the analyst had not factored in a contract win in his model, he had expected Workhorse to play a role, given the U.S. administration’s recent stance around zero-emission government fleets. Osborne maintained his buy-equivalent rating on the stock but lowered his price target to $18 from $25.

“While investors are clearly shooting first and asking questions later, we believe that Workhorse could present a compelling entry point following the about 50% sell-off,” he said in a note.

Not all analysts are recommending buying the stock. Oppenheimer’s Colin Rusch lowered his rating on the stock to the equivalent of a hold from buy, saying estimates on the company now need to come down with USPS trucks coming out of forecast models and as the availability of battery packs remaining challenging.

“We are now expecting the company to turn Ebitda positive in 2023, a year later than we previously anticipated,” he wrote in a note to clients.

Workhorse in a statement earlier on Wednesday said it has requested additional information from the USPS and is waiting for a response. The company intends to explore all avenues that are available to nonawarded finalists in a government bidding process.

The USPS said that as part of the 10-year contract, Oshkosh Defense will manufacture postal delivery vehicles, which will drive the “most dramatic modernization of the USPS fleet in three decades.” Under the award’s initial $482 million investment, Oshkosh will finalize the design of the vehicle for mail and package delivery, and will assemble 50,000 to 165,000 of them over the contract period.

The vehicles will be equipped with either fuel-efficient internal combustion engines or battery-electric powertrains, USPS said in a statement.

The contract could be worth more than $5.7 billion in revenue over its 10-year life span, wrote Bloomberg Intelligence analyst Christopher Ciolino.

In October 2020, short seller Fuzzy Panda Research had alleged that Workhorse destroyed its chances of landing the much-anticipated contract after its design and manufacturing led to numerous critical failures in the prototype USPS trucks. Workhorse had declined to comment on the report at that time.

Cincinnati-based Workhorse owns a 10% stake in Lordstown Motors of Lordstown, Ohio, where the electric vehicles were expected to be built, at the site of the former General Motors Lordstown Assembly plant.

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