Back to top

Image: Bigstock

Otis Worldwide (OTIS) Soars to 52-Week High, Time to Cash Out?

Read MoreHide Full Article

Shares of Otis Worldwide (OTIS - Free Report) have been strong performers lately, with the stock up 8.8% over the past month. The stock hit a new 52-week high of $90.67 in the previous session. Otis Worldwide has gained 33.1% since the start of the year compared to the 20.3% move for the Zacks Construction sector and the 15% return for the Zacks Building Products - Miscellaneous industry.

What's Driving the Outperformance?

The stock has an impressive record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on July 26, 2021, Otis Worldwide reported EPS of $0.79 versus consensus estimate of $0.71 while it beat the consensus revenue estimate by 7.08%.

For the current fiscal year, Otis Worldwide is expected to post earnings of $2.97 per share on $14.28 billion in revenues. This represents a 17.86% change in EPS on a 11.98% change in revenues. For the next fiscal year, the company is expected to earn $3.27 per share on $14.84 billion in revenues. This represents a year-over-year change of 10.1% and 3.87%, respectively.

Valuation Metrics

Otis Worldwide may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company has run ahead of itself.

On this front, we can look at the Zacks Style Scores, as these give investors a variety of ways to comb through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.

Otis Worldwide has a Value Score of D. The stock's Growth and Momentum Scores are B and B, respectively, giving the company a VGM Score of B.

In terms of its value breakdown, the stock currently trades at 30.3X current fiscal year EPS estimates. On a trailing cash flow basis, the stock currently trades at 30.3X versus its peer group's average of 16.2X. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.

Zacks Rank

We also need to consider the stock's Zacks Rank, as this supersedes any trend on the style score front. Fortunately, Otis Worldwide currently has a Zacks Rank of #2 (Buy) thanks to rising earnings estimates.

Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Otis Worldwide meets the list of requirements. Thus, it seems as though Otis Worldwide shares could still be poised for more gains ahead.

How Does Otis Worldwide Stack Up to the Competition?

Shares of Otis Worldwide have been rising, and the company still appears to be a decent choice, but what about the rest of the industry? Some of its industry peers are also looking good, including Quanex Building Products (NX - Free Report) , Owens Corning (OC - Free Report) , and Watsco (WSO - Free Report) , all of which currently have a Zacks Rank of at least #2 and a VGM Score of at least B, making them well-rounded choices.

The Zacks Industry Rank is in the top 30% of all the industries we have in our universe, so it looks like there are some nice tailwinds for Otis Worldwide, even beyond its own solid fundamental situation.

Published in