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Otis Worldwide Corporation (OTIS - Free Report) reported solid results fourth-quarter 2022. Its earnings and sales surpassed the Zacks Consensus Estimate. Its quarterly results reflected strong performance, including mid-single-digit organic sales growth in New Equipment and Service and continued operating profit margin expansion in the Service business.
The company remains focused on strong portfolio growth and generating a solid New Equipment backlog. It also intends to expand operating margins, return cash to shareholders through a capital-allocation strategy and pursue additional progress toward ESG goals.
Chair, president & CEO of Otis, Judy Marks, stated, “For the third year in a row, we delivered strong annual results. We are successfully navigating through macro challenges that have pressured our business. In 2022 we delivered 7.1% growth in New Equipment Orders, accelerated growth in our industry-leading Service portfolio to 4.1%, and grew adjusted EPS high single digits — while distributing over $1.3B to shareholders, including $850M through share repurchases.”
Shares of OTIS gained by a meager 0.01% following the earnings release.
Otis Worldwide Corporation Price, Consensus and EPS Surprise
The company reported quarterly earnings of 75 cents per share, surpassing the consensus estimate of 73 cents by 2.7% and increasing 4.2% from the year-ago quarter’s figure of 72 cents. The upside was mainly driven by operating profit growth at constant currency and a lower effective tax rate, partially offset by headwinds from foreign exchange translation.
Net sales of $3.4 billion topped the consensus mark of $3.3 million by 3.8% but declined 3.6% on a year-over-year basis. Adjusted net sales fell 1.9% year over year to $3.4 billion. Organically, net sales rose 6.1% year over year for the quarter. Currency headwinds impacted sales by 8.2%. Adjusted operating margin remained flat year over year at 14.7%, as gains from segment performance and the mix were offset by corporate cost headwinds.
Segment Details
New Equipment’s net sales of $1.5 billion fell 6.5% and adjusted net sales of $1.5 billion dropped 3.1% from the prior-year period’s levels. An 8.1% reduction in foreign exchange was partly offset by a 5.1% increase in organic sales.
Organic sales were up 12% and 10.7% in the EMEA and the Americas, respectively. Asia’s organic sales were down slightly and Asia Pacific registered low teens growth in organic sales. However, China witnessed a 4.3% decline in organic sales.
New Equipment orders were up 4% at constant currency in the quarter. The metric was up by the high-single digit in Asia Pacific and EMEA and by a mid-single digit in China. However, the Americas witnessed a mid-single-digit decline in New Equipment orders.
The New Equipment backlog was up 3% in 2022 and the adjusted backlog at constant currency increased 11% from 2021.
Adjusted operating margin contracted 10 basis points (bps) year over year to 4.9% due to commodity headwinds and unfavorable mix.
Service’s net sales fell 1.4% to $1.98 billion and adjusted revenues dipped 1% year over year. A 6.9% rise in organic sales was offset by an 8.3% headwind from foreign exchange. Organic maintenance and repair sales grew 6.5%, and organic modernization sales rose 8.8% from the prior-year quarter.
Adjusted operating margin registered an improvement of 70 bps year over year to 23.9%, driven by higher volume, favorable pricing and productivity, partially offset by wage inflation.
2022 Highlights
Earnings were $3.17 per share in the year, reflecting an increase of 7.5% from 2021. Net sales of $13.69 billion declined 4.3% and decreased 3.3% on an adjusted basis. Organic sales witnessed 2.5% growth.
New Equipment sales were down 8.8% and down 6.9% on an adjusted basis. Service sales were down 0.6% and down 0.5% on an adjusted basis.
Financial Position
Otis had cash and cash equivalents of $1.19 billion as of Dec 31, 2022. This compares unfavorably with 2021-end numbers of $1.57 billion. Long-term debt was $6.098 billion as of Dec 31, 2022, down from $7.25 billion in the 2021-end.
Net cash flows provided by operating activities were $464 million for the fourth quarter, up from $277 million a year ago. In 2022, the metric was $1,560 million, down from $1,750 million in 2021.
Free cash flow (FCF) totaled $430 million for the quarter, up from $236 million a year ago. In 2022, FCF was $1.44 billion, down from $1.59 billion in 2021.
2023 Guidance
For 2023, the company expects net sales to be within $13.8-$14.1 billion. The new projection indicates 1.5-4% year-over-year growth. Organic sales growth is projected to be 4-6% (up 3-5% for New Equipment and up 5-7% for Service). Adjusted operating profit is projected to be $2.2-$2.25 billion, up $130 to $175 million at constant currency and up $70 to $130 million at actual currency.
Adjusted earnings per share are anticipated to be $3.35-$3.50, suggesting 6-10% year-over-year growth. The adjusted effective tax rate is likely to be 26-26.5%. Free cash flow is expected to be $1.5-$1.55 billion.
United Rentals, Inc. (URI - Free Report) reported fourth-quarter 2022 results. Its earnings and revenues missed the Zacks Consensus Estimate but increased on a year-over-year basis on the back of sustained demand in its end markets and the strength of its core rental business.
URI provided solid full-year 2023 guidance for total revenues and adjusted EBITDA, given broad-based end-market activity, contractor backlogs, customer sentiment and solid visibility. Also, it unveiled a quarterly dividend of $1.48 per share, with an annualized yield of approximately 1.5%. The company also plans to restart its share repurchase program, with the intention of buying back $1 billion of common stock in 2023.
Weyerhaeuser Company (WY - Free Report) reported fourth-quarter 2022 results. Although its earnings beat the Zacks Consensus Estimate, the same declined from the year-ago period's levels.
WY’s quarterly performance reflects strong execution across the businesses, which was offset by macroeconomic headwinds, supply chain disruptions and dynamic market conditions.
D.R. Horton, Inc. (DHI - Free Report) reported first-quarter fiscal 2023 results, wherein the company’s earnings and revenues surpassed the Zacks Consensus Estimate.
DHI’s chairman of the board, Donald R. Horton, said, “Beginning in June 2022 and continuing through today, we have seen a moderation in housing demand caused by significant increases in mortgage interest rates and general economic uncertainty. While these pressures may persist for some time, the supply of both new and existing homes at affordable price points remains limited and demographics supporting housing demand remain favorable.”
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Otis (OTIS) Q4 Earnings & Sales Beat Estimates, Backlog Solid
Otis Worldwide Corporation (OTIS - Free Report) reported solid results fourth-quarter 2022. Its earnings and sales surpassed the Zacks Consensus Estimate. Its quarterly results reflected strong performance, including mid-single-digit organic sales growth in New Equipment and Service and continued operating profit margin expansion in the Service business.
The company remains focused on strong portfolio growth and generating a solid New Equipment backlog. It also intends to expand operating margins, return cash to shareholders through a capital-allocation strategy and pursue additional progress toward ESG goals.
Chair, president & CEO of Otis, Judy Marks, stated, “For the third year in a row, we delivered strong annual results. We are successfully navigating through macro challenges that have pressured our business. In 2022 we delivered 7.1% growth in New Equipment Orders, accelerated growth in our industry-leading Service portfolio to 4.1%, and grew adjusted EPS high single digits — while distributing over $1.3B to shareholders, including $850M through share repurchases.”
Shares of OTIS gained by a meager 0.01% following the earnings release.
Otis Worldwide Corporation Price, Consensus and EPS Surprise
Otis Worldwide Corporation price-consensus-eps-surprise-chart | Otis Worldwide Corporation Quote
Earnings & Revenue Discussion
The company reported quarterly earnings of 75 cents per share, surpassing the consensus estimate of 73 cents by 2.7% and increasing 4.2% from the year-ago quarter’s figure of 72 cents. The upside was mainly driven by operating profit growth at constant currency and a lower effective tax rate, partially offset by headwinds from foreign exchange translation.
Net sales of $3.4 billion topped the consensus mark of $3.3 million by 3.8% but declined 3.6% on a year-over-year basis. Adjusted net sales fell 1.9% year over year to $3.4 billion. Organically, net sales rose 6.1% year over year for the quarter. Currency headwinds impacted sales by 8.2%.
Adjusted operating margin remained flat year over year at 14.7%, as gains from segment performance and the mix were offset by corporate cost headwinds.
Segment Details
New Equipment’s net sales of $1.5 billion fell 6.5% and adjusted net sales of $1.5 billion dropped 3.1% from the prior-year period’s levels. An 8.1% reduction in foreign exchange was partly offset by a 5.1% increase in organic sales.
Organic sales were up 12% and 10.7% in the EMEA and the Americas, respectively. Asia’s organic sales were down slightly and Asia Pacific registered low teens growth in organic sales. However, China witnessed a 4.3% decline in organic sales.
New Equipment orders were up 4% at constant currency in the quarter. The metric was up by the high-single digit in Asia Pacific and EMEA and by a mid-single digit in China. However, the Americas witnessed a mid-single-digit decline in New Equipment orders.
The New Equipment backlog was up 3% in 2022 and the adjusted backlog at constant currency increased 11% from 2021.
Adjusted operating margin contracted 10 basis points (bps) year over year to 4.9% due to commodity headwinds and unfavorable mix.
Service’s net sales fell 1.4% to $1.98 billion and adjusted revenues dipped 1% year over year. A 6.9% rise in organic sales was offset by an 8.3% headwind from foreign exchange. Organic maintenance and repair sales grew 6.5%, and organic modernization sales rose 8.8% from the prior-year quarter.
Adjusted operating margin registered an improvement of 70 bps year over year to 23.9%, driven by higher volume, favorable pricing and productivity, partially offset by wage inflation.
2022 Highlights
Earnings were $3.17 per share in the year, reflecting an increase of 7.5% from 2021. Net sales of $13.69 billion declined 4.3% and decreased 3.3% on an adjusted basis. Organic sales witnessed 2.5% growth.
New Equipment sales were down 8.8% and down 6.9% on an adjusted basis. Service sales were down 0.6% and down 0.5% on an adjusted basis.
Financial Position
Otis had cash and cash equivalents of $1.19 billion as of Dec 31, 2022. This compares unfavorably with 2021-end numbers of $1.57 billion. Long-term debt was $6.098 billion as of Dec 31, 2022, down from $7.25 billion in the 2021-end.
Net cash flows provided by operating activities were $464 million for the fourth quarter, up from $277 million a year ago. In 2022, the metric was $1,560 million, down from $1,750 million in 2021.
Free cash flow (FCF) totaled $430 million for the quarter, up from $236 million a year ago. In 2022, FCF was $1.44 billion, down from $1.59 billion in 2021.
2023 Guidance
For 2023, the company expects net sales to be within $13.8-$14.1 billion. The new projection indicates 1.5-4% year-over-year growth. Organic sales growth is projected to be 4-6% (up 3-5% for New Equipment and up 5-7% for Service). Adjusted operating profit is projected to be $2.2-$2.25 billion, up $130 to $175 million at constant currency and up $70 to $130 million at actual currency.
Adjusted earnings per share are anticipated to be $3.35-$3.50, suggesting 6-10% year-over-year growth. The adjusted effective tax rate is likely to be 26-26.5%. Free cash flow is expected to be $1.5-$1.55 billion.
Zacks Rank & Some Recent Construction Releases
Otis currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
United Rentals, Inc. (URI - Free Report) reported fourth-quarter 2022 results. Its earnings and revenues missed the Zacks Consensus Estimate but increased on a year-over-year basis on the back of sustained demand in its end markets and the strength of its core rental business.
URI provided solid full-year 2023 guidance for total revenues and adjusted EBITDA, given broad-based end-market activity, contractor backlogs, customer sentiment and solid visibility. Also, it unveiled a quarterly dividend of $1.48 per share, with an annualized yield of approximately 1.5%. The company also plans to restart its share repurchase program, with the intention of buying back $1 billion of common stock in 2023.
Weyerhaeuser Company (WY - Free Report) reported fourth-quarter 2022 results. Although its earnings beat the Zacks Consensus Estimate, the same declined from the year-ago period's levels.
WY’s quarterly performance reflects strong execution across the businesses, which was offset by macroeconomic headwinds, supply chain disruptions and dynamic market conditions.
D.R. Horton, Inc. (DHI - Free Report) reported first-quarter fiscal 2023 results, wherein the company’s earnings and revenues surpassed the Zacks Consensus Estimate.
DHI’s chairman of the board, Donald R. Horton, said, “Beginning in June 2022 and continuing through today, we have seen a moderation in housing demand caused by significant increases in mortgage interest rates and general economic uncertainty. While these pressures may persist for some time, the supply of both new and existing homes at affordable price points remains limited and demographics supporting housing demand remain favorable.”