The loss of the United States Postal Service contract by the Workhorse Group constitutes a major setback for the company, whose base case scenario lies in the long-drawn deal.
American manufacturing company specialized in the production of electrically powered delivery and utility vehicles Workhorse Group Inc (NASDAQ: WKHS) has lost the United States Postal Service (USPS) contract to rival Oshkosh Corp (NYSE: OSK). The news led to a drop in Workhorse shares.
According to a report from Yahoo Finance, the USPS deal is part of a long-standing plan by the government agency to overhaul its delivery vans to modern state-of-the-art vehicles that can boost its operations. The contract to design and produce the new products was awarded to Oshkosh Corp, with the span of 10 years. The deal will be implemented by a unit of the company, Oshkosh Defense.
The terms of the contract read:
“Oshkosh Defense will finalize the production design of the Next Generation Delivery Vehicle (NGDV) – a purpose-built, right-hand-drive vehicle for mail and package delivery – and will assemble 50,000 to 165,000 of them over 10 years.”
The United States Postal Service will be making an initial investment of $482 million dollars and the contract could be worth over $5.7 billion in revenues over the course of the 10 years the deal is expected to span through.
The loss of the contract has tremendously weighed on the shares of Workhorse Group and they closed down 47.46% on Tuesday to $16.46 per share. A further drop was seen in the pre-market as the Ohio-based firm plunged by an additional 4.83%.
Simultaneously, the deal impacted Oshkosh stock which closed 6.14% to $109.62.
Deal Slippage from Workhorse Group Caused Gall in Shares
The loss of the United States Postal Service contract by the Workhorse Group constitutes a major setback for the company, whose base case scenario lies in the long-drawn deal.
Analysts had tipped the firm as the USPS’ favorite, not minding the time the award winner gets revealed.
“We are less concerned about when it is announced and more concerned about how much of the contract WKHS wins,” said BTIG analyst Gregory Lewis, “We continue to view the USPS contract as a significant potential catalyst for the stock.”
While the loss of the deal is a major setback for the company, it will look to boost its presence and maintain focus with both its old partners as well as the new private or non-government-related clients. This is in addition to its partnerships with United Parcel Service, Inc (NYSE: UPS), and FedEx Corporation (NYSE: FDX). Yahoo Finance reported that Workhorse won its largest delivery truck order for 6,320 C-Series all-electric delivery vehicles of both C-1000 and C-650 models from the Pride Group Enterprises.
Despite the 47% dip in its share price, WKHS stock is still up 347% year-on-year.