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Otis (OTIS) Q2 Earnings & Revenues Top Estimates, '23 View Up
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Otis Worldwide Corporation’s (OTIS - Free Report) earnings and sales surpassed the Zacks Consensus Estimate. Its quarterly results reflected 11th consecutive quarters of organic sales growth and solid operating margin expansion contributing to mid-single digit adjusted earnings per share (EPS) growth.
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.
Earnings & Revenue Discussion
The company reported quarterly adjusted EPS of 92 cents, surpassing the consensus estimate of 86 cents by 7% and increasing 7% from the year-ago quarter’s figure of 86 cents. The upside was mainly driven by gains from operational improvement and share count, partially offset by headwinds from foreign exchange translation.
Net sales of $3.72 billion topped the consensus mark of $3.55 million by 4.8% and improved 6.7% on a year-over-year basis. Adjusted net sales also advanced 7.7% year over year. Organically, net sales rose 9.5% year over year for the quarter. Currency headwinds impacted sales by 2.1%.
Adjusted operating margin expanded 20 basis points (bps) year over year to 15.9%. Our model predicted the adjusted operating margin to expand 30 bps year over year to 16%. Benefits from favorable segment mix were partly offset by headwinds associated with corporate costs in the quarter.
Otis Worldwide Corporation Price, Consensus and EPS Surprise
New Equipment’s net sales of $1.6 billion increased 4.6%, and adjusted net sales of $1.6 billion grew 6.3% from the prior-year period’s levels. Organically, sales advanced 9.5%. Our model predicted organic sales for New Equipment segment to grow 5.2% in the quarter.
Organic sales were up in the high-single digit in the Americas and EMEA, respectively. The metric was up by low teen digit in Asia.
New Equipment orders were down 12% at constant currency in the quarter. The metric was up by 3% in Asia, down 12% in EMEA and down 32% in the Americas.
The New Equipment adjusted backlog at constant currency increased 5% year over year and 3% sequentially.
Adjusted operating margin contracted 10 bps year over year to 7.4% due to unfavorable regional and product mix, foreign exchange impact, and higher SG&A expenses.
Service’s net sales grew 8.3% to $2.12 billion and adjusted revenues improved 8.8% year over year. A 9.4% rise in organic sales was offset by a 1.1% headwind from foreign exchange. Our model predicted organic sales for Service segment to grow 6.6% in the quarter. Meanwhile, organic maintenance and repair sales grew 9.1%, and organic modernization sales rose 10.9% in the second quarter from the prior-year quarter.
Adjusted operating margin registered an improvement of 50 bps year over year to 23.6%, driven by higher volume, favorable pricing and productivity, partially offset by wage inflation and higher material costs.
Financial Position
Otis had cash and cash equivalents of $1.22 billion as of Jun 30, 2023. This compares favorably with 2022-end numbers of $1.19 billion. Long-term debt was $6.12 billion as of Jun 30, 2023, up from $6.1 billion at 2022-end.
Net cash flows provided by operating activities were $446 million for the June quarter, up from $353 million a year ago.
Free cash flow (FCF) totaled $409 million for the quarter, up from $326 million a year ago.
2023 Guidance
For 2023, the company expects adjusted net sales to be within $14-14.3 billion. The new projection indicates 3.5-5.5% year-over-year growth (2.5-4.5% growth expected earlier). Organic sales growth is now projected to be 4.5-6% (up 3-5% for New Equipment and up 6-7% for Service). Adjusted operating profit is projected to be up $155 to $175 million at constant currency.
Adjusted EPS is now anticipated to be $3.45-$3.50 versus $3.40-$3.50 expected earlier. The updated outlook suggests 9-10% year-over-year growth. FCF is expected to be $1.5-$1.55 billion.
PulteGroup Inc. (PHM - Free Report) reported impressive results in second-quarter 2023. Its earnings and revenues surpassed their respective Zacks Consensus Estimates and increased year over year. The upside was mainly driven by its solid operating model, which strategically aligns the production of build-to-order and quick-move-in homes with applicable demand across consumer groups.
Backed by its disciplined and balanced business model, the company witnessed solid gross closings, orders and margins in the reported quarter and posted a 12-month return on equity of 32%.
D.R. Horton, Inc. (DHI - Free Report) reported third-quarter fiscal 2023 (ended Jun 30, 2023) results, wherein earnings and revenues surpassed their respective Zacks Consensus Estimate.
On a year-over-year basis, although earnings declined, revenues increased. The company highlighted that the supply of both new and existing homes at affordable price points remains limited and that the demographics supporting housing demand remain favorable. This tailwind has helped this Arlington, TX-based homebuilder to witness net sales order growth of 37% year over year in the fiscal third quarter.
KB Home (KBH - Free Report) reported better-than-expected results for second-quarter fiscal 2023 (ended May 31, 2023). Both earnings and revenues beat the Zacks Consensus Estimate. The company’s earnings and revenues surpassed the consensus mark in two consecutive quarters.
KBH’s net orders grew 1% in the quarter to 3,936 units from the prior year. The value of net orders, however, was down 11% from the year-ago quarter to $1.9 billion due to lower ASP. Sequentially, net orders grew 84% in units and 90% in value, respectively.
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Otis (OTIS) Q2 Earnings & Revenues Top Estimates, '23 View Up
Otis Worldwide Corporation’s (OTIS - Free Report) earnings and sales surpassed the Zacks Consensus Estimate. Its quarterly results reflected 11th consecutive quarters of organic sales growth and solid operating margin expansion contributing to mid-single digit adjusted earnings per share (EPS) growth.
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.
Earnings & Revenue Discussion
The company reported quarterly adjusted EPS of 92 cents, surpassing the consensus estimate of 86 cents by 7% and increasing 7% from the year-ago quarter’s figure of 86 cents. The upside was mainly driven by gains from operational improvement and share count, partially offset by headwinds from foreign exchange translation.
Net sales of $3.72 billion topped the consensus mark of $3.55 million by 4.8% and improved 6.7% on a year-over-year basis. Adjusted net sales also advanced 7.7% year over year. Organically, net sales rose 9.5% year over year for the quarter. Currency headwinds impacted sales by 2.1%.
Adjusted operating margin expanded 20 basis points (bps) year over year to 15.9%. Our model predicted the adjusted operating margin to expand 30 bps year over year to 16%. Benefits from favorable segment mix were partly offset by headwinds associated with corporate costs in the quarter.
Otis Worldwide Corporation Price, Consensus and EPS Surprise
Otis Worldwide Corporation price-consensus-eps-surprise-chart | Otis Worldwide Corporation Quote
Segment Details
New Equipment’s net sales of $1.6 billion increased 4.6%, and adjusted net sales of $1.6 billion grew 6.3% from the prior-year period’s levels. Organically, sales advanced 9.5%. Our model predicted organic sales for New Equipment segment to grow 5.2% in the quarter.
Organic sales were up in the high-single digit in the Americas and EMEA, respectively. The metric was up by low teen digit in Asia.
New Equipment orders were down 12% at constant currency in the quarter. The metric was up by 3% in Asia, down 12% in EMEA and down 32% in the Americas.
The New Equipment adjusted backlog at constant currency increased 5% year over year and 3% sequentially.
Adjusted operating margin contracted 10 bps year over year to 7.4% due to unfavorable regional and product mix, foreign exchange impact, and higher SG&A expenses.
Service’s net sales grew 8.3% to $2.12 billion and adjusted revenues improved 8.8% year over year. A 9.4% rise in organic sales was offset by a 1.1% headwind from foreign exchange. Our model predicted organic sales for Service segment to grow 6.6% in the quarter.
Meanwhile, organic maintenance and repair sales grew 9.1%, and organic modernization sales rose 10.9% in the second quarter from the prior-year quarter.
Adjusted operating margin registered an improvement of 50 bps year over year to 23.6%, driven by higher volume, favorable pricing and productivity, partially offset by wage inflation and higher material costs.
Financial Position
Otis had cash and cash equivalents of $1.22 billion as of Jun 30, 2023. This compares favorably with 2022-end numbers of $1.19 billion. Long-term debt was $6.12 billion as of Jun 30, 2023, up from $6.1 billion at 2022-end.
Net cash flows provided by operating activities were $446 million for the June quarter, up from $353 million a year ago.
Free cash flow (FCF) totaled $409 million for the quarter, up from $326 million a year ago.
2023 Guidance
For 2023, the company expects adjusted net sales to be within $14-14.3 billion. The new projection indicates 3.5-5.5% year-over-year growth (2.5-4.5% growth expected earlier). Organic sales growth is now projected to be 4.5-6% (up 3-5% for New Equipment and up 6-7% for Service). Adjusted operating profit is projected to be up $155 to $175 million at constant currency.
Adjusted EPS is now anticipated to be $3.45-$3.50 versus $3.40-$3.50 expected earlier. The updated outlook suggests 9-10% year-over-year growth. FCF is expected to be $1.5-$1.55 billion.
Zacks Rank & Some Recent Construction Releases
Otis currently carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
PulteGroup Inc. (PHM - Free Report) reported impressive results in second-quarter 2023. Its earnings and revenues surpassed their respective Zacks Consensus Estimates and increased year over year. The upside was mainly driven by its solid operating model, which strategically aligns the production of build-to-order and quick-move-in homes with applicable demand across consumer groups.
Backed by its disciplined and balanced business model, the company witnessed solid gross closings, orders and margins in the reported quarter and posted a 12-month return on equity of 32%.
D.R. Horton, Inc. (DHI - Free Report) reported third-quarter fiscal 2023 (ended Jun 30, 2023) results, wherein earnings and revenues surpassed their respective Zacks Consensus Estimate.
On a year-over-year basis, although earnings declined, revenues increased. The company highlighted that the supply of both new and existing homes at affordable price points remains limited and that the demographics supporting housing demand remain favorable. This tailwind has helped this Arlington, TX-based homebuilder to witness net sales order growth of 37% year over year in the fiscal third quarter.
KB Home (KBH - Free Report) reported better-than-expected results for second-quarter fiscal 2023 (ended May 31, 2023). Both earnings and revenues beat the Zacks Consensus Estimate. The company’s earnings and revenues surpassed the consensus mark in two consecutive quarters.
KBH’s net orders grew 1% in the quarter to 3,936 units from the prior year. The value of net orders, however, was down 11% from the year-ago quarter to $1.9 billion due to lower ASP. Sequentially, net orders grew 84% in units and 90% in value, respectively.