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Otis Worldwide's Q3 Earnings & Sales Miss Estimates, '24 View Down
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Otis Worldwide Corporation (OTIS - Free Report) reported dismal results in the third quarter of 2024, with adjusted earnings and net sales missing the Zacks Consensus Estimate. The company reported lower-than-expected earnings in the quarter after four consecutive quarters of earnings beat.
The top and bottom lines increased on a year-over-year basis.
See the Zacks Earnings Calendar to stay ahead of market-making news.
The quarterly results reflect soft contributions from the company’s New Equipment segment due to tepid demand trends, mainly in China. The impact of lower volume and unfavorable mix in this segment hurt the quarter’s results. The downtrend was, however, partially offset by sales growth in Asia Pacific and the Americas, along with favorable price, productivity and commodity mix.
Also, notable contributions from the Service segment helped improve the results to some extent.
OTIS stock lost 6.3% in the pre-market trading session on Wednesday, after releasing the earnings result. The investors’ sentiment is likely to have been hurt by the company’s downward revision of its 2024 outlook across key metrics.
Inside OTIS’ Headlines
The company reported adjusted earnings of 96 cents per share, which missed the Zacks Consensus Estimate of 97 cents by 1%. The reported figure increased 1.1% from the year-ago quarter’s earnings per share (EPS) of 95 cents.
Net sales of $3.55 billion missed the consensus mark by 1.3% but grew marginally by 0.7% on a year-over-year basis. Organically, net sales increased 1.2% year over year. Currency headwinds impacted sales by 0.8%.
Otis Worldwide Corporation Price, Consensus and EPS Surprise
Adjusted operating margin remained flat year over year at 16.9%, attributable to favorable segment mix offset by New Equipment segment performance and headwinds in corporate costs. Our model predicted the adjusted operating margin to expand 50 basis points (bps) year over year to 17.4%.
Segment Details of OTIS
New Equipment: This segment’s net sales of $1.31 billion fell 8.8% from the prior-year period. Organic sales declined 8.2%, which was accompanied by a 0.7% headwind from foreign exchange. Our model predicted organic sales for the New Equipment segment to decline 2.8%.
New Equipment orders were down 3% at constant currency. Growth in the Americas and Asia Pacific was more than offset by flat sales trends in Europe, the Middle East and Africa (EMEA) and softness in China. The segment’s backlog at constant currency declined 3% year over year.
Segment operating margin was down 80 bps year over year to 6.4%.
Service: The net sales of this segment increased 7.2% year over year to $2.24 billion. A 7.7% rise in organic sales and a 0.8% benefit from foreign exchange aided the top line. Organic maintenance and repair sales increased 6.4% and organic modernization sales rose 13.7% from the year-ago quarter. Our model predicted organic sales for the segment to grow 6.8%.
Modernization backlog at constant currency increased 12% year over year.
Segment operating margin was flat year over year at 24.8%, due to higher volume, favorable pricing and productivity, partially offset by annual wage inflation.
Financial Position of OTIS
Otis had cash and cash equivalents of $827 million as of Sept. 30, 2024, down from $1.27 billion reported in 2023-end. Long-term debt was $5.6 billion as of the third-quarter end, down from $6.87 billion in 2023-end.
For the nine months ended Sept. 30, net cash flows provided by operating activities were $873 million, down from $1.03 billion a year ago.
Adjusted free cash flow (FCF) totaled $381 million in the third quarter, up from $274 million a year ago.
OTIS’ Revised 2024 Outlook
The company now expects net sales to be approximately $14.2 billion compared with the prior expected range of $14.3-$14.5 billion.
Organic sales growth is now projected to be about 1.5% compared with prior expected band of 1-3%. Organic New Equipment sales are now expected to be down between mid to high single digit compared with the prior expected decline in mid-single digits. Organic Service sales are now expected to be up approximately 6.5% compared with the prior expected range of 6-7%.
Adjusted operating profit is currently anticipated to be around $2.375 billion, down from the prior expected range of $2.40 - $2.45 billion, which is up about $140 million at constant currency.
Adjusted EPS is now anticipated to be about $3.85 compared with the prior expected range of $3.85-$3.90.
Adjusted FCF is now expected to be between $1.4 billion and $1.5 billion compared with the earlier expected range of $1.5 - $1.6 billion.
KBR, Inc. (KBR - Free Report) reported mixed third-quarter fiscal 2024 results, with adjusted earnings surpassing the Zacks Consensus Estimate and revenues missing the same. The top and bottom lines increased on a year-over-year basis.
The quarter’s results were backed by the benefits realized from the LinQuest acquisition and solid contributions from both the reportable businesses, given the increased demand trends for its services. Although high costs and expenses were headwinds, leverage from the increased top line aided the uptick.
United Rentals, Inc. (URI - Free Report) reported third-quarter 2024 results, wherein its EPS and revenues fell short of the Zacks Consensus Estimate. Nonetheless, both the metrics registered improvement on a year-over-year basis.
The company has tightened the outlook ranges for revenues, adjusted EBITDA, rental capital expenditures and net cash from operating activities while reaffirming the midpoints of its 2024 forecast.
NVR, Inc. (NVR - Free Report) reported mixed third-quarter 2024 results, with earnings missing the Zacks Consensus Estimate and Homebuilding revenues surpassing the same. On the other hand, both the metrics increased on a year-over-year basis.
This upside was backed by improved demand trends, which resulted in higher settlements. Although the cancelation rate increased in the quarter, growth in new orders is encouraging for the company.
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Otis Worldwide's Q3 Earnings & Sales Miss Estimates, '24 View Down
Otis Worldwide Corporation (OTIS - Free Report) reported dismal results in the third quarter of 2024, with adjusted earnings and net sales missing the Zacks Consensus Estimate. The company reported lower-than-expected earnings in the quarter after four consecutive quarters of earnings beat.
The top and bottom lines increased on a year-over-year basis.
See the Zacks Earnings Calendar to stay ahead of market-making news.
The quarterly results reflect soft contributions from the company’s New Equipment segment due to tepid demand trends, mainly in China. The impact of lower volume and unfavorable mix in this segment hurt the quarter’s results. The downtrend was, however, partially offset by sales growth in Asia Pacific and the Americas, along with favorable price, productivity and commodity mix.
Also, notable contributions from the Service segment helped improve the results to some extent.
OTIS stock lost 6.3% in the pre-market trading session on Wednesday, after releasing the earnings result. The investors’ sentiment is likely to have been hurt by the company’s downward revision of its 2024 outlook across key metrics.
Inside OTIS’ Headlines
The company reported adjusted earnings of 96 cents per share, which missed the Zacks Consensus Estimate of 97 cents by 1%. The reported figure increased 1.1% from the year-ago quarter’s earnings per share (EPS) of 95 cents.
Net sales of $3.55 billion missed the consensus mark by 1.3% but grew marginally by 0.7% on a year-over-year basis. Organically, net sales increased 1.2% year over year. Currency headwinds impacted sales by 0.8%.
Otis Worldwide Corporation Price, Consensus and EPS Surprise
Otis Worldwide Corporation price-consensus-eps-surprise-chart | Otis Worldwide Corporation Quote
Adjusted operating margin remained flat year over year at 16.9%, attributable to favorable segment mix offset by New Equipment segment performance and headwinds in corporate costs. Our model predicted the adjusted operating margin to expand 50 basis points (bps) year over year to 17.4%.
Segment Details of OTIS
New Equipment: This segment’s net sales of $1.31 billion fell 8.8% from the prior-year period. Organic sales declined 8.2%, which was accompanied by a 0.7% headwind from foreign exchange. Our model predicted organic sales for the New Equipment segment to decline 2.8%.
New Equipment orders were down 3% at constant currency. Growth in the Americas and Asia Pacific was more than offset by flat sales trends in Europe, the Middle East and Africa (EMEA) and softness in China. The segment’s backlog at constant currency declined 3% year over year.
Segment operating margin was down 80 bps year over year to 6.4%.
Service: The net sales of this segment increased 7.2% year over year to $2.24 billion. A 7.7% rise in organic sales and a 0.8% benefit from foreign exchange aided the top line. Organic maintenance and repair sales increased 6.4% and organic modernization sales rose 13.7% from the year-ago quarter. Our model predicted organic sales for the segment to grow 6.8%.
Modernization backlog at constant currency increased 12% year over year.
Segment operating margin was flat year over year at 24.8%, due to higher volume, favorable pricing and productivity, partially offset by annual wage inflation.
Financial Position of OTIS
Otis had cash and cash equivalents of $827 million as of Sept. 30, 2024, down from $1.27 billion reported in 2023-end. Long-term debt was $5.6 billion as of the third-quarter end, down from $6.87 billion in 2023-end.
For the nine months ended Sept. 30, net cash flows provided by operating activities were $873 million, down from $1.03 billion a year ago.
Adjusted free cash flow (FCF) totaled $381 million in the third quarter, up from $274 million a year ago.
OTIS’ Revised 2024 Outlook
The company now expects net sales to be approximately $14.2 billion compared with the prior expected range of $14.3-$14.5 billion.
Organic sales growth is now projected to be about 1.5% compared with prior expected band of 1-3%. Organic New Equipment sales are now expected to be down between mid to high single digit compared with the prior expected decline in mid-single digits. Organic Service sales are now expected to be up approximately 6.5% compared with the prior expected range of 6-7%.
Adjusted operating profit is currently anticipated to be around $2.375 billion, down from the prior expected range of $2.40 - $2.45 billion, which is up about $140 million at constant currency.
Adjusted EPS is now anticipated to be about $3.85 compared with the prior expected range of $3.85-$3.90.
Adjusted FCF is now expected to be between $1.4 billion and $1.5 billion compared with the earlier expected range of $1.5 - $1.6 billion.
OTIS' Zacks Rank & 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.
KBR, Inc. (KBR - Free Report) reported mixed third-quarter fiscal 2024 results, with adjusted earnings surpassing the Zacks Consensus Estimate and revenues missing the same. The top and bottom lines increased on a year-over-year basis.
The quarter’s results were backed by the benefits realized from the LinQuest acquisition and solid contributions from both the reportable businesses, given the increased demand trends for its services. Although high costs and expenses were headwinds, leverage from the increased top line aided the uptick.
United Rentals, Inc. (URI - Free Report) reported third-quarter 2024 results, wherein its EPS and revenues fell short of the Zacks Consensus Estimate. Nonetheless, both the metrics registered improvement on a year-over-year basis.
The company has tightened the outlook ranges for revenues, adjusted EBITDA, rental capital expenditures and net cash from operating activities while reaffirming the midpoints of its 2024 forecast.
NVR, Inc. (NVR - Free Report) reported mixed third-quarter 2024 results, with earnings missing the Zacks Consensus Estimate and Homebuilding revenues surpassing the same. On the other hand, both the metrics increased on a year-over-year basis.
This upside was backed by improved demand trends, which resulted in higher settlements. Although the cancelation rate increased in the quarter, growth in new orders is encouraging for the company.