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OTIS Provides Medium-Term Guidance for Sales & EPS, Shares Up
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Otis Worldwide Corporation (OTIS - Free Report) unveiled its medium-term outlook, long-term growth strategy, operating profit drivers, and capital allocation plans at its 2024 Investor Day hosted on Feb 15.
Shares of this leading elevator and escalator manufacturing, installation and service company gained 1.9% on Feb 15, after the news release.
Medium-Term Outlook
OTIS expects organic sales to be up in low to mid-single digits. Also, it projects organic New Equipment sales within flat to up low-single digits, and organic Service sales to be up in mid-single digits.
Modernization sales growth is likely to be more than 50% for another phase (through 2028 from 2023). Notably, Modernization and New Equipment profits are expected to double by 2028 from 2023.
Average adjusted operating profit is expected to grow in the mid-to-high single digits, while average adjusted operating margin is likely to be in the range of 40-50 basis points. Adjusted earnings per share (EPS) CAGR is likely to be up by more than 10%.
Adjusted free cash flow CAGR is likely to be up in the high single digits.
Impressively, it plans to return more than $8 billion in capital to shareholders via dividends and share repurchases through 2028 from 2024.
Moreover, Otis reiterates its 2024 outlook with organic sales up 3-5% and adjusted EPS up 7-10% with an adjusted free cash flow of nearly $1.6 billion.
Share Price Performance
Shares of this Zacks Rank #3 (Hold) company have underperformed in the industry in the past six months.
Image Source: Zacks Investment Research
Otis is exposed to fluctuations in foreign currency exchange rates, owing to international sales, purchases, investments and other transactions. In 2023, net sales were hurt partially by a 1.2% headwind from foreign exchange.
Apart from currency headwinds, changes in economic conditions, as well as risks associated with changes in government laws, regulations and policies, may affect product demand and profits in non-U.S. operations. Currently, China is the largest end market for sales of Otis’ New Equipment business. 2023 New Equipment orders were down 4% year over year due to a mid-single-digit decline in China and a low-teens decrease in the Americas.
Nonetheless, the company is benefiting from market-leading businesses, innovative products and process technologies, and capabilities.
Key Picks
Some better-ranked stocks in the same space are:
Installed Building Products, Inc. (IBP - Free Report) : This Columbus, OH-based company is one of the nation's leading new residential insulation installers and a diversified installer of complementary building products. The company is poised to gain from favorable pricing strategies, geographic and product diversification strategies, as well as solid acquisitions despite the cyclicality of the U.S. housing market.
Installed Building, a Zacks Rank #1 (Strong Buy) stock, has seen an upward estimate revision in 2024 earnings to $10.84 per share from $10.76 over the past 60 days. The estimated figure indicates 7.2% year-over-year growth. You can see the complete list of today’s Zacks #1 Rank stocks here.
Advanced Drainage Systems, Inc. (WMS - Free Report) : Headquartered in Hilliard, OH, this company provides innovative water management solutions in stormwater and on-site septic wastewater industries. Despite a challenging operating environment, the company has been gaining from strong volume growth in Allied Products, Infiltrator and the residential end market. The material conversion strategy, complete water management solutions and focus on key sales programs have been driving growth.
WMS, also a Zacks Rank #1 stock, has seen an upward estimate revision to $5.79 for 2024 earnings from $5.63 over the past seven days.
Armstrong World Industries, Inc. (AWI - Free Report) : Headquartered in Lancaster, PA, Armstrong World is a leading global producer of ceiling systems for use primarily in the construction and renovation of commercial, institutional and residential buildings. The company has been benefiting from an increased focus on new products and a systematic inorganic strategy to enhance its portfolio. Benefits from the acquisitions of Turf, Moz and Arktura have been aiding the company.
AWI, a Zacks Rank #2 (Buy) stock, has seen an upward estimate revision for 2024 earnings to $5.52 per share from $5.48 over the past 30 days. The company’s earnings for 2024 are expected to increase 7.5% year over year.
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OTIS Provides Medium-Term Guidance for Sales & EPS, Shares Up
Otis Worldwide Corporation (OTIS - Free Report) unveiled its medium-term outlook, long-term growth strategy, operating profit drivers, and capital allocation plans at its 2024 Investor Day hosted on Feb 15.
Shares of this leading elevator and escalator manufacturing, installation and service company gained 1.9% on Feb 15, after the news release.
Medium-Term Outlook
OTIS expects organic sales to be up in low to mid-single digits. Also, it projects organic New Equipment sales within flat to up low-single digits, and organic Service sales to be up in mid-single digits.
Modernization sales growth is likely to be more than 50% for another phase (through 2028 from 2023). Notably, Modernization and New Equipment profits are expected to double by 2028 from 2023.
Average adjusted operating profit is expected to grow in the mid-to-high single digits, while average adjusted operating margin is likely to be in the range of 40-50 basis points. Adjusted earnings per share (EPS) CAGR is likely to be up by more than 10%.
Adjusted free cash flow CAGR is likely to be up in the high single digits.
Impressively, it plans to return more than $8 billion in capital to shareholders via dividends and share repurchases through 2028 from 2024.
Moreover, Otis reiterates its 2024 outlook with organic sales up 3-5% and adjusted EPS up 7-10% with an adjusted free cash flow of nearly $1.6 billion.
Share Price Performance
Shares of this Zacks Rank #3 (Hold) company have underperformed in the industry in the past six months.
Image Source: Zacks Investment Research
Otis is exposed to fluctuations in foreign currency exchange rates, owing to international sales, purchases, investments and other transactions. In 2023, net sales were hurt partially by a 1.2% headwind from foreign exchange.
Apart from currency headwinds, changes in economic conditions, as well as risks associated with changes in government laws, regulations and policies, may affect product demand and profits in non-U.S. operations. Currently, China is the largest end market for sales of Otis’ New Equipment business. 2023 New Equipment orders were down 4% year over year due to a mid-single-digit decline in China and a low-teens decrease in the Americas.
Nonetheless, the company is benefiting from market-leading businesses, innovative products and process technologies, and capabilities.
Key Picks
Some better-ranked stocks in the same space are:
Installed Building Products, Inc. (IBP - Free Report) : This Columbus, OH-based company is one of the nation's leading new residential insulation installers and a diversified installer of complementary building products. The company is poised to gain from favorable pricing strategies, geographic and product diversification strategies, as well as solid acquisitions despite the cyclicality of the U.S. housing market.
Installed Building, a Zacks Rank #1 (Strong Buy) stock, has seen an upward estimate revision in 2024 earnings to $10.84 per share from $10.76 over the past 60 days. The estimated figure indicates 7.2% year-over-year growth. You can see the complete list of today’s Zacks #1 Rank stocks here.
Advanced Drainage Systems, Inc. (WMS - Free Report) : Headquartered in Hilliard, OH, this company provides innovative water management solutions in stormwater and on-site septic wastewater industries. Despite a challenging operating environment, the company has been gaining from strong volume growth in Allied Products, Infiltrator and the residential end market. The material conversion strategy, complete water management solutions and focus on key sales programs have been driving growth.
WMS, also a Zacks Rank #1 stock, has seen an upward estimate revision to $5.79 for 2024 earnings from $5.63 over the past seven days.
Armstrong World Industries, Inc. (AWI - Free Report) : Headquartered in Lancaster, PA, Armstrong World is a leading global producer of ceiling systems for use primarily in the construction and renovation of commercial, institutional and residential buildings. The company has been benefiting from an increased focus on new products and a systematic inorganic strategy to enhance its portfolio. Benefits from the acquisitions of Turf, Moz and Arktura have been aiding the company.
AWI, a Zacks Rank #2 (Buy) stock, has seen an upward estimate revision for 2024 earnings to $5.52 per share from $5.48 over the past 30 days. The company’s earnings for 2024 are expected to increase 7.5% year over year.