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Otis Worldwide (OTIS) Up 4.4% Since Last Earnings Report: Can It Continue?
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A month has gone by since the last earnings report for Otis Worldwide (OTIS - Free Report) . Shares have added about 4.4% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Otis Worldwide due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Otis Worldwide reported mixed results in first-quarter 2024, wherein its earnings surpassed the Zacks Consensus Estimate but net sales missed the same. The top and bottom lines grew on a year-over-year basis.
Its quarterly results reflected 14 consecutive quarters of organic sales growth and the results were marked by a high-teens growth in adjusted earnings per share (EPS). Thanks to the strength in modernization, the company witnessed orders growth of more than 10%, leading to mid-teens backlog growth.
Otis has been leveraging its Service-driven business model and intends to focus on enhancing its operational performance and shareholder value through a capital-allocation strategy and pursue additional progress toward ESG goals.
Abiding by its commitment to enhance shareholder value on the back of its accretive strategies, Otis announced a 14.7% hike in its quarterly dividend payment to 39 cents per share. The dividend will be paid on Jun 7, 2024, to shareholders as of May 17, 2024.
Inside the Headlines
The company reported quarterly earnings of 88 cents per share, surpassing the Zacks Consensus Estimate of 87 cents by 1.1% and increasing 10% from the year-ago quarter’s figure of 80 cents. The upside was mainly driven by operational improvement, a lower share count and effective tax rate improvement.
Net sales of $3.44 billion missed the consensus mark by 0.2% but rose 2.7% on a year-over-year basis. Organically, net sales rose 3.8% year over year for the quarter. Currency headwinds benefited sales by 1.2%.
Adjusted operating margin expanded 80 basis points (bps) to 16.3% from the year-ago period’s level, backed by favorable segment performance and mix.
Segment Details
New Equipment’s net sales of $1.28 billion fell 2.1% from the prior-year period. Organic sales declined 0.5%, which was accompanied by a 1.6% headwind from foreign exchange.
New Equipment orders were down 10% at constant currency. Growth in EMEA and Asia Pacific was more than offset by softness in the Americas and China. The New Equipment’s backlog at constant currency was flat year over year in the quarter.
Segment operating margin was up 20 bps year over year at 5.5%.
Service’s net sales increased 5.8% to $2.16 billion year over year. A 6.5% rise in organic sales and a 0.8% benefit from foreign exchange helped the top line. Organic maintenance and repair sales grew 5.8% and organic modernization sales rose 9.7% from the year-ago quarter.
Modernization orders were up 12.9% at constant currency during the reported quarter. Modernization backlog at constant currency increased 15% year over year.
Segment operating margin registered an improvement of 70 bps year over year to 24.2%, driven by higher volume, favorable pricing and productivity, partially offset by annual wage inflation.
Financial Position
Otis had cash and cash equivalents of $884 million as of Mar 31, 2024, down from $1.27 billion reported in 2023 end. Long-term debt was $6.85 billion as of Mar 31, 2024, down from $6.87 billion in 2023 end.
Net cash flows provided by operating activities were $171 million for the March quarter, down from $278 million a year ago. Adjusted free cash flow (“FCF”) totaled $155 million for the quarter, down from $253 million a year ago.
Updated 2024 Guidance
For 2024, the company expects net sales to be nearly $14.5-$14.8 billion. The new projection indicates approximately 2-4% growth. Organic sales growth is projected to be 3-5% (flat for New Equipment and up 6-7% for Service). Adjusted operating profit is now projected to be $160-$190 million, up from the prior expectation of $150-$190 million at constant currency.
Adjusted EPS is now anticipated to be between $3.83 and $3.90, (priorly expected $3.80-$3.90). The updated outlook suggests 8-10% year-over-year growth. Adjusted FCF is still expected to be $1.6 billion.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
VGM Scores
Currently, Otis Worldwide has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. Notably, Otis Worldwide has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Otis Worldwide (OTIS) Up 4.4% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Otis Worldwide (OTIS - Free Report) . Shares have added about 4.4% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Otis Worldwide due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
OTIS Q1 Earnings Beat, Organic Sales Up, '24 View Raised
Otis Worldwide reported mixed results in first-quarter 2024, wherein its earnings surpassed the Zacks Consensus Estimate but net sales missed the same. The top and bottom lines grew on a year-over-year basis.
Its quarterly results reflected 14 consecutive quarters of organic sales growth and the results were marked by a high-teens growth in adjusted earnings per share (EPS). Thanks to the strength in modernization, the company witnessed orders growth of more than 10%, leading to mid-teens backlog growth.
Otis has been leveraging its Service-driven business model and intends to focus on enhancing its operational performance and shareholder value through a capital-allocation strategy and pursue additional progress toward ESG goals.
Abiding by its commitment to enhance shareholder value on the back of its accretive strategies, Otis announced a 14.7% hike in its quarterly dividend payment to 39 cents per share. The dividend will be paid on Jun 7, 2024, to shareholders as of May 17, 2024.
Inside the Headlines
The company reported quarterly earnings of 88 cents per share, surpassing the Zacks Consensus Estimate of 87 cents by 1.1% and increasing 10% from the year-ago quarter’s figure of 80 cents. The upside was mainly driven by operational improvement, a lower share count and effective tax rate improvement.
Net sales of $3.44 billion missed the consensus mark by 0.2% but rose 2.7% on a year-over-year basis. Organically, net sales rose 3.8% year over year for the quarter. Currency headwinds benefited sales by 1.2%.
Adjusted operating margin expanded 80 basis points (bps) to 16.3% from the year-ago period’s level, backed by favorable segment performance and mix.
Segment Details
New Equipment’s net sales of $1.28 billion fell 2.1% from the prior-year period. Organic sales declined 0.5%, which was accompanied by a 1.6% headwind from foreign exchange.
New Equipment orders were down 10% at constant currency. Growth in EMEA and Asia Pacific was more than offset by softness in the Americas and China. The New Equipment’s backlog at constant currency was flat year over year in the quarter.
Segment operating margin was up 20 bps year over year at 5.5%.
Service’s net sales increased 5.8% to $2.16 billion year over year. A 6.5% rise in organic sales and a 0.8% benefit from foreign exchange helped the top line. Organic maintenance and repair sales grew 5.8% and organic modernization sales rose 9.7% from the year-ago quarter.
Modernization orders were up 12.9% at constant currency during the reported quarter. Modernization backlog at constant currency increased 15% year over year.
Segment operating margin registered an improvement of 70 bps year over year to 24.2%, driven by higher volume, favorable pricing and productivity, partially offset by annual wage inflation.
Financial Position
Otis had cash and cash equivalents of $884 million as of Mar 31, 2024, down from $1.27 billion reported in 2023 end. Long-term debt was $6.85 billion as of Mar 31, 2024, down from $6.87 billion in 2023 end.
Net cash flows provided by operating activities were $171 million for the March quarter, down from $278 million a year ago. Adjusted free cash flow (“FCF”) totaled $155 million for the quarter, down from $253 million a year ago.
Updated 2024 Guidance
For 2024, the company expects net sales to be nearly $14.5-$14.8 billion. The new projection indicates approximately 2-4% growth. Organic sales growth is projected to be 3-5% (flat for New Equipment and up 6-7% for Service). Adjusted operating profit is now projected to be $160-$190 million, up from the prior expectation of $150-$190 million at constant currency.
Adjusted EPS is now anticipated to be between $3.83 and $3.90, (priorly expected $3.80-$3.90). The updated outlook suggests 8-10% year-over-year growth. Adjusted FCF is still expected to be $1.6 billion.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
VGM Scores
Currently, Otis Worldwide has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. Notably, Otis Worldwide has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.