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The Pentagon on Tuesday awarded a $1.06 billion contract to Oshkosh Corp. (OSK) to build armored patrol trucks for U.S. troops in Afghanistan, sending its shares up 25% in late trading.

The Wisconsin-based maker of fire trucks and other specialty trucks will initially build 2,244 all-terrain trucks. Analysts say the order volume could eventually total more than 5,000 trucks, based on the money available for the vehicles.

Other companies competing for the production contract were Navistar International Corp. (NAV); Force Dynamics LLC, a joint venture between defense contractors General Dynamics Corp. (GD) and Force Protection Inc. (FRPT); and BAE Systems PLC (BAESY). Oshkosh said it will be able to comply with the accelerated production pace requested by the Pentagon to get the trucks into action as quickly as possible.

"We and our suppliers have already made significant investments in materials and are well positioned to accelerate our manufacturing capabilities," Andy Hove, the president of Oshkosh's defense unit, said in a written statement.

Its shares were recently up 25% after-hours at $18.18, after having closed down 1.69% at $14.54 in the regular session.

"This is the biggest thing that could have happened to them," said Basili Alukos, an analyst who follows the company for research firm Morningstar Inc. "They needed this desperately."

Falling demand for Oshkosh's products, particularly its construction equipment, have kept the company's profits under pressure following a series of acquisitions in recent years that doubled the company's annual sales.

Oshkosh's sales for the fiscal first half ended March 31fell 18% to $2.68 billion. The company reported a $1.21 billion loss amid large charge-offs, compared with income of $109.9 million, or 1.47 a share, in the same period a year earlier.

Oshkosh already supplies large and medium-size cargo trucks to the military. As the winning entry for the all-terrain vehicle, Oshkosh is positioned to influence the Pentagon debate over a replacement for the military's ubiquitous Humvee utility trucks.

The Humvee has been the workhorse for all branches of the military for 25 years, but in combat in Iraq and Afghanistan the truck has been particularly vulnerable to rocket attacks and land mines.

The new truck is intended as a smaller, more mobile variant of the Mine Resistant Ambush Protected, or MRAP, trucks deployed in Iraq to counter roadside bombs.

The MRAPs, which were credited with reducing U.S. casualties and helping coalition forces defeat insurgents in Iraq, proved to be too large and top-heavy for Afghanistan's mountainous terrain and rugged, unpaved roads. Most of the 16,000 MRAPs purchased by the Pentagon since 2007 were built by Navistar, BAE Systems and Force Protection.

Truck and engine maker Navistar, which had been considered a frontrunner for the new off-road truck, said late Tuesday it plans to continue pursuing other truck contracts with the U.S. military and is aggressively marketing its MRAPs to foreign armies.

Oshkosh's truck adds to an increasingly crowded fleet of tactical and utility trucks in the U.S. military's fleet. Observers predict that if the Oshkosh vehicle performs well in combat, it will likely put pressure on Pentagon officials to rethink the Joint Light Tactical Vehicle program, or JLTV, which has been considered as the replacement for the Humvee.

Pentagon spending constraints, however, have caused some Pentagon observers to conclude the JLTV program will be scaled back or eliminated if less-expensive alternatives are available.

"It appears the JLTV program will shrink because of the availability of so many vehicles that were armored for Iraq and Afghanistan," said Loren Thompson, chief operating officer for the Lexington Institute, a defense industry think tank in Virginia.

-By Bob Tita, Dow Jones Newswires; 312-750-4129; robert.tita@dowjones.com