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Q2 EPS of $1.05 topped estimates, but sales fell short at $3.6B, hurt by a 10% drop in New Equipment revenues.
Service sales rose 6% YoY with modernization backlog up 16%, lifting segment margin to 24.9%.
OTIS lowered 2025 sales and FCF guidance, now seeing just 1-2% revenue growth and $1.4-$1.5B in FCF.
Otis Worldwide Corporation (OTIS - Free Report) reported mixed results in the second quarter of 2025, wherein adjusted earnings surpassed the Zacks Consensus Estimate while net sales missed the same. On a year-over-year basis, the top line and the bottom line tumbled.
The quarterly results were impacted by a soft sales trend in the New Equipment segment, partially offset by year-over-year growth in contributions from the Service segment. The Service segment grew, driven by increased trends in organic maintenance and repair sales and organic modernization sales, supporting the overall performance.
The company’s continued focus on modernization is backing its order and backlog growth. Moving forward, OTIS believes that the efficient execution of its Service segment-driven strategy and robust repair business will position it well for 2025 and beyond. With the improved performance and commitment to creating value for its shareholders, the company reiterated its 2025 earnings per share (EPS) view.
Following the results, OTIS stock lost 5.8% during today’s pre-market trading session.
Inside OTIS’ Q2 Headlines
The company reported adjusted earnings of $1.05 per share, which topped the Zacks Consensus Estimate of $1.02 by 2.9%. However, the reported figure inched down 1% from the year-ago quarter’s EPS of $1.06.
Net sales of $3.6 billion missed the consensus mark of $3.69 billion by 2.4% and marginally declined 0.2% on a year-over-year basis. Organically, net sales were down 2% year over year. Currency headwinds impacted sales by 1%.
Otis Worldwide Corporation Price, Consensus and EPS Surprise
Adjusted operating margin remained flat year over year at 17%. The result indicates reduced contributions from the New Equipment segment, mostly offset by growth in the Service segment. Our model predicted the adjusted operating margin to expand 20 basis points (bps) year over year to 17.2%.
Segment Details of OTIS
Service: The net sales of this segment increased 6% year over year to $2.32 billion. A 4% rise in organic sales was partially offset by a 2% negative impact from foreign exchange. Organic maintenance and repair sales increased 4% and organic modernization sales rose 5% from the year-ago quarter. Our model estimated organic sales for the segment to grow 6.1%. Modernization backlog at constant currency increased 16% year over year.
Segment operating margin expanded 20 bps year over year to 24.9%, due to higher volume, favorable pricing and productivity, partially offset by inflationary pressures including higher labor costs and mix.
New Equipment: This segment’s net sales of $1.28 billion fell 10% from the prior-year period. Organic sales declined 11%. Our model predicted organic sales for the New Equipment segment to decline 6.4%.
New Equipment orders were down 1% at constant currency. The growth of more than 20% in Asia Pacific and low-teens improvement in the Americas were offset by more than a 20% decline in China and a low-single-digit decline in EMEA. The segment’s backlog decreased 1% at actual currency and 3% at constant currency. Excluding China, the segment’s backlog grew 10% at actual currency and 8% at constant currency.
Segment operating margin contracted 240 bps year over year to 5.3%. The downtrend was due to impacts of lower volume, unfavorable price and mix, which was partially offset by productivity tailwinds and other restructuring actions.
Financial Position of OTIS
Otis Worldwide had cash and cash equivalents of $688 million as of June 30, 2025, down from $2.3 billion reported at 2024-end. Long-term debt increased to $7.07 billion as of the second-quarter end from $6.97 billion at 2024-end.
Net cash flows provided by operating activities were $405 million as of the first six months of 2025, down from $479 million a year ago.
Adjusted free cash flow (FCF) totaled $429 million at the end of the first six months, down from $508 million a year ago.
OTIS Revises 2025 Guidance
The company now expects net sales to be between $14.5 billion and $14.6 billion, down from the prior expectation of $14.6-$14.8 billion. The new projection indicates approximately 1-2% year-over-year growth. Organic sales growth is now projected to be approximately 1%, down from the prior expected range of 2- 4%.
Organic New Equipment sales are now expected to be down about 7%, wider than the previous expectation between 1% and 4%. Organic Service sales are now expected to be up nearly 5% compared with the previously expected range of 5-7%.
Adjusted operating profit is still expected to be between $2.4 billion and $2.5 billion, reflecting an increase of $50-$90 million at constant currency, excluding a tariff impact of ($35) million to ($25) million and an increase of $55-$105 million at actual currency, including tariff impacts.
Adjusted EPS is still anticipated to be between $4.00 and $4.10, indicating 4-7% year-over-year growth.
Adjusted FCF is now expected to be between $1.4 billion and $1.5 billion, down from the prior expectation of approximately $1.6 billion. OTIS expects the adjusted effective tax rate to be approximately 24.8%.
Here are some stocks from the Zacks Industrial Products sector, which per our model, have the right combination of elements to deliver an earnings beat this time around.
Greif, Inc. (GEF - Free Report) has an Earnings ESP of +6.95% and a Zacks Rank of 1.
The company’s earnings beat estimates in two of the last four quarters and missed on the other two occasions, the negative average surprise being 10.8%. Greif’s earnings for the third quarter of fiscal 2025 are expected to increase 35.9%.
Stanley Black & Decker, Inc. (SWK - Free Report) currently has an Earnings ESP of +18.80% and a Zacks Rank #3 (Hold).
The company’s earnings beat estimates in each of the trailing four quarters, the average surprise being 18.4%. Stanley Black & Decker’s earnings for the second quarter of 2025 are expected to decline 65.1%.
A. O. Smith Corporation (AOS - Free Report) currently has an Earnings ESP of +4.48% and a Zacks Rank of 3.
The company’s earnings beat estimates in one of the last four quarters, met on one occasion and missed on the other two occasions, the average surprise being 0.04%. A. O. Smith’s earnings for the second quarter of 2025 are expected to tumble 8.5%.
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Otis Worldwide Q2 Earnings Top, Sales Miss, 2025 Sales View Down
Key Takeaways
Otis Worldwide Corporation (OTIS - Free Report) reported mixed results in the second quarter of 2025, wherein adjusted earnings surpassed the Zacks Consensus Estimate while net sales missed the same. On a year-over-year basis, the top line and the bottom line tumbled.
The quarterly results were impacted by a soft sales trend in the New Equipment segment, partially offset by year-over-year growth in contributions from the Service segment. The Service segment grew, driven by increased trends in organic maintenance and repair sales and organic modernization sales, supporting the overall performance.
The company’s continued focus on modernization is backing its order and backlog growth. Moving forward, OTIS believes that the efficient execution of its Service segment-driven strategy and robust repair business will position it well for 2025 and beyond. With the improved performance and commitment to creating value for its shareholders, the company reiterated its 2025 earnings per share (EPS) view.
Following the results, OTIS stock lost 5.8% during today’s pre-market trading session.
Inside OTIS’ Q2 Headlines
The company reported adjusted earnings of $1.05 per share, which topped the Zacks Consensus Estimate of $1.02 by 2.9%. However, the reported figure inched down 1% from the year-ago quarter’s EPS of $1.06.
Net sales of $3.6 billion missed the consensus mark of $3.69 billion by 2.4% and marginally declined 0.2% on a year-over-year basis. Organically, net sales were down 2% year over year. Currency headwinds impacted sales by 1%.
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 17%. The result indicates reduced contributions from the New Equipment segment, mostly offset by growth in the Service segment. Our model predicted the adjusted operating margin to expand 20 basis points (bps) year over year to 17.2%.
Segment Details of OTIS
Service: The net sales of this segment increased 6% year over year to $2.32 billion. A 4% rise in organic sales was partially offset by a 2% negative impact from foreign exchange. Organic maintenance and repair sales increased 4% and organic modernization sales rose 5% from the year-ago quarter. Our model estimated organic sales for the segment to grow 6.1%. Modernization backlog at constant currency increased 16% year over year.
Segment operating margin expanded 20 bps year over year to 24.9%, due to higher volume, favorable pricing and productivity, partially offset by inflationary pressures including higher labor costs and mix.
New Equipment: This segment’s net sales of $1.28 billion fell 10% from the prior-year period. Organic sales declined 11%. Our model predicted organic sales for the New Equipment segment to decline 6.4%.
New Equipment orders were down 1% at constant currency. The growth of more than 20% in Asia Pacific and low-teens improvement in the Americas were offset by more than a 20% decline in China and a low-single-digit decline in EMEA. The segment’s backlog decreased 1% at actual currency and 3% at constant currency. Excluding China, the segment’s backlog grew 10% at actual currency and 8% at constant currency.
Segment operating margin contracted 240 bps year over year to 5.3%. The downtrend was due to impacts of lower volume, unfavorable price and mix, which was partially offset by productivity tailwinds and other restructuring actions.
Financial Position of OTIS
Otis Worldwide had cash and cash equivalents of $688 million as of June 30, 2025, down from $2.3 billion reported at 2024-end. Long-term debt increased to $7.07 billion as of the second-quarter end from $6.97 billion at 2024-end.
Net cash flows provided by operating activities were $405 million as of the first six months of 2025, down from $479 million a year ago.
Adjusted free cash flow (FCF) totaled $429 million at the end of the first six months, down from $508 million a year ago.
OTIS Revises 2025 Guidance
The company now expects net sales to be between $14.5 billion and $14.6 billion, down from the prior expectation of $14.6-$14.8 billion. The new projection indicates approximately 1-2% year-over-year growth. Organic sales growth is now projected to be approximately 1%, down from the prior expected range of 2- 4%.
Organic New Equipment sales are now expected to be down about 7%, wider than the previous expectation between 1% and 4%. Organic Service sales are now expected to be up nearly 5% compared with the previously expected range of 5-7%.
Adjusted operating profit is still expected to be between $2.4 billion and $2.5 billion, reflecting an increase of $50-$90 million at constant currency, excluding a tariff impact of ($35) million to ($25) million and an increase of $55-$105 million at actual currency, including tariff impacts.
Adjusted EPS is still anticipated to be between $4.00 and $4.10, indicating 4-7% year-over-year growth.
Adjusted FCF is now expected to be between $1.4 billion and $1.5 billion, down from the prior expectation of approximately $1.6 billion. OTIS expects the adjusted effective tax rate to be approximately 24.8%.
OTIS' Zacks Rank
Otis Worldwide currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Stocks With the Favorable Combination
Here are some stocks from the Zacks Industrial Products sector, which per our model, have the right combination of elements to deliver an earnings beat this time around.
Greif, Inc. (GEF - Free Report) has an Earnings ESP of +6.95% and a Zacks Rank of 1.
The company’s earnings beat estimates in two of the last four quarters and missed on the other two occasions, the negative average surprise being 10.8%. Greif’s earnings for the third quarter of fiscal 2025 are expected to increase 35.9%.
Stanley Black & Decker, Inc. (SWK - Free Report) currently has an Earnings ESP of +18.80% and a Zacks Rank #3 (Hold).
The company’s earnings beat estimates in each of the trailing four quarters, the average surprise being 18.4%. Stanley Black & Decker’s earnings for the second quarter of 2025 are expected to decline 65.1%.
A. O. Smith Corporation (AOS - Free Report) currently has an Earnings ESP of +4.48% and a Zacks Rank of 3.
The company’s earnings beat estimates in one of the last four quarters, met on one occasion and missed on the other two occasions, the average surprise being 0.04%. A. O. Smith’s earnings for the second quarter of 2025 are expected to tumble 8.5%.