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Otis (OTIS) Beats on Earnings in Q1, Increases Dividend

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Otis Worldwide Corporation (OTIS - Free Report) reported strong results in first-quarter 2022. Its earnings surpassed the Zacks Consensus Estimate and improved on a year-over-year basis. Sales also improved from the year-ago figure but marginally lagged the consensus mark.

Shares of this elevator and escalator manufacturing company grew 3.4% in the pre-market trading session on Apr 25.

President & CEO of Otis, Judy Marks, stated, "In addition, year-to-date, we have made progress on our capital allocation strategy by successfully increasing our ownership in Zardoya Otis that will result in its automatic delisting in early May, repaying $500 million of debt and returning cash to shareholders through $200 million in share repurchases and a more than 20% increase in our dividend.” She added, “Looking ahead, despite the intensifying macro challenges, including the impact from the crisis in Ukraine, we expect to achieve 3 to 4% organic sales growth and 10% adjusted EPS growth at the midpoint."

On Apr 24, the company announced a quarterly dividend hike of 20.8% to 29 cents per share. The dividend will be payable on Jun 10, 2022, to shareholders of record at the close of business on May 20. The company currently has a dividend payout of 32% and a dividend yield of 1.31%, based on the closing share price of $73.42 on Apr 22. The recent move represents 45% dividend growth since it has become a public company.

Earnings & Revenue Discussion

The company reported quarterly earnings of 77 cents per share, which surpassed the consensus estimate of 75 cents by 2.7% and increased 6.9% from the year-ago figure of 72 cents. The upside was mainly driven by operating profit growth, a reduction in share count and a lower effective tax rate.

Otis Worldwide Corporation Price, Consensus and EPS Surprise

 

Otis Worldwide Corporation Price, Consensus and EPS Surprise

Otis Worldwide Corporation price-consensus-eps-surprise-chart | Otis Worldwide Corporation Quote

 

Net sales of $3.41 billion marginally missed the consensus mark of $3.43 million but improved 0.2% on a year-over-year basis. Organically, net sales grew 3.1% year over year for the quarter.

Adjusted operating margin expanded 30 basis points (bps) to 15.9% from the year-ago period, with margin expansion in Service.

Segment Details

New Equipment’s adjusted revenues of $1.42 billion dropped 2.5% from the prior-year period’s levels, due to a 0.5% decline in organic sales. Organic sales were up in mid-single-digit in EMEA and low-single-digit in the Asia Pacific, which was more than offset by declines in the Americas and China. New Equipment orders were up 8.8% at constant currency, backed by growth across the regions. New equipment backlog also increased 6% at constant currency from the prior year.

Adjusted operating margin contracted 70 bps year over year to 6.8% due to commodity headwinds and lower volume.

Service's adjusted revenues improved 2.2% year over year to $1.99 billion, backed by a 5.8% rise in organic sales. Organic maintenance and repair sales grew 5.8%, and organic modernization sales rose 6.9% from the prior-year quarter. Adjusted operating margin registered an improvement of 30 bps year over year to 22.9%, driven by higher volume, favorable pricing and productivity, partially offset by labor inflation.

Financial Position

Otis had cash and cash equivalents of $1.57 billion as of Dec 31, 2021. This compares unfavorably with 2020-end numbers of $1.78 billion. Long-term debt was $7.25 million as of Dec 31, 2021, up from $5.26 million in 2020-end.

Net cash flows provided by operating activities were $504 million for the first quarter, down from $585 million a year ago. Free cash flow totaled $474 million for the quarter, down from $541 million a year ago.

2022 Guidance (Excluding Russia)

For 2022, the company expects adjusted net sales to be within $14.1-$14.3 billion, indicating a 0.5-1.5% year-over-year increase. Organic sales growth is likely to be 3-4% (flat to up 1.5% for New Equipment and 5-6% for Service). Adjusted operating profit is projected within $2.2-$2.25 billion, up $40-$90 million in actual currency and $105-$155 million at constant currency.

Adjusted earnings per share are anticipated to be $3.22-$3.27, suggesting 9-11% year-over-year growth. The adjusted effective tax rate is likely to be 27.7%. Free cash flow now is expected to be nearly $1.6 billion.

Zacks Rank

Otis currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

A Few Recent Construction Releases

Watsco, Inc. (WSO - Free Report) reported stellar results for first-quarter 2022. The company’s earnings and sales topped their respective Zacks Consensus Estimate and increased strongly on a year-over-year basis.

WSO is benefiting from regular investments in customer-focused technologies and the expansion of its branch network. Also, continued investment in technologies designed to revolutionize customer experience added to the positives.

RPM International Inc. (RPM - Free Report) reported third-quarter fiscal 2022 (ended Feb 28, 2022) results, with earnings and sales topping the Zacks Consensus Estimate.

Robust construction and industrial maintenance activity, a rebound in energy markets and RPM’s focus on investments in the fastest-growing areas of its business led to the upside.

UFP Industries, Inc. (UFPI - Free Report) reported stellar results for first-quarter 2022. Both earnings and net sales beat the Zacks Consensus Estimate as well as improved impressively on a year-over-year basis.

With this, UFPI’s earnings and sales surpassed the consensus mark in all the trailing five quarters. The uptrend was mainly driven by the diversity of markets and an improved pricing model.

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