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OTIS Q3 Earnings & Revenues Beat Estimates on Strong Service Growth
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Key Takeaways
Otis beats Q3 earnings and revenue estimates, with adjusted EPS of $1.05 and sales up 6% to $3.91B.
Service sales climb 8% to $2.62B as organic modernization growth hits 20%, but margins narrow 130 bps.
New Equipment margins fall 150 bps as Otis keeps its 2026 sales and EPS view, but trims adjusted FCF target.
Otis Worldwide Corporation (OTIS - Free Report) reported third-quarter 2026 results, wherein adjusted earnings beat the Zacks Consensus Estimate but remained flat year over year. Net sales also surpassed the consensus mark and increased from the year-ago quarter.
OTIS' performance reflected strong Service growth, supported by modernization and repair activity, alongside improved New Equipment sales. Strong modernization orders and expanding backlog highlighted healthy demand across the business. However, weaker New Equipment profitability weighed on overall margins.
Following the results, OTIS’ shares declined 0.9% during today's pre-market trading session.
Inside OTIS' Q3 Headlines
Otis posted adjusted earnings of $1.05 per share, beating the Zacks Consensus Estimate of $1 by 5%. The bottom line was unchanged from the year-ago quarter.
Net sales of $3.91 billion surpassed the consensus mark of $3.85 billion by 1.7% and increased 6% from $3.69 billion in the prior-year period. Organic sales advanced 6%, driven by growth in both Service and New Equipment. Modernization orders increased 10% at constant currency, while modernization backlog expanded 20% year over year.
Adjusted operating profit slipped $6 million to $626 million from $632 million. The adjusted operating margin contracted 110 basis points (bps) to 16% from 17.1%, reflecting unfavorable segment performance, partly offset by a favorable business mix.
Segment Details of OTIS
Service: Net sales from the segment increased 8% year over year to $2.62 billion from $2.43 billion. Organic sales rose 7%, driven by broad-based demand across the business. Organic maintenance and repair sales increased 4%, while organic modernization sales jumped 20%. Our model estimated organic sales for the segment to grow 0.3%.
Segment operating profit increased to $633 million from $621 million a year ago. However, operating margin contracted 130 basis points (bps) to 24.2% from 25.5%. Higher labor costs, ongoing strategic investments and an unfavorable mix partly offset benefits from higher volumes, favorable pricing and employment-related cost reductions.
Service operating margin improved 100 bps sequentially. Management highlighted investments in field capability and AI-enabled pricing as contributors to double-digit modernization growth and high-single-digit repair growth.
New Equipment: Net sales increased 3% year over year to $1.3 billion from $1.26 billion. Organic sales also rose 3%, driven by low-teens growth in the Americas, mid-single-digit growth in EMEA and high-single-digit growth in Asia Pacific. This was partly offset by a more than 20% decline in China. Our model predicted organic sales for the New Equipment segment to increase 6.1%.
New Equipment orders increased 1% at constant currency, with growth across the Americas, EMEA and Asia Pacific partly offsetting a low-teens decline in China. Backlog increased 4% at both actual and constant currency.
Segment operating profit declined to $42 million from $59 million. Operating margin contracted 150 bps to 3.2% from 4.7%, primarily due to unfavorable pricing and mix, partly offset by productivity gains and higher volume.
OTIS' Cash Flow and Balance Sheet Update
Net cash provided by operating activities totaled $337 million, down from $374 million a year ago. Free cash flow declined to $298 million from $337 million, while adjusted free cash flow fell to $272 million from $337 million. Working-capital changes offset the benefit from higher net income.
During the first nine months of 2026, operating cash flow grew to $1.02 billion from $779 million. Adjusted free cash flow increased to $834 million from $766 million. Otis repurchased $807 million in shares and paid $498 million in common dividends during the period.
Cash and cash equivalents totaled $866 million at Sept. 30, 2026, compared with $1.1 billion at the end of 2025. Long-term debt increased to $7.05 billion from $6.9 billion over the same period.
Otis Maintains 2026 Sales and Earnings Outlook
The company reaffirmed its full-year net sales outlook of $15.1-$15.3 billion, implying approximately 4.6-6% year-over-year growth and expects organic sales growth in the low to mid-single digits. Organic Service sales are projected to increase in the mid to high-single digits, while organic New Equipment sales are expected to range from a low-single-digit decline to flat.
Otis continues to project adjusted operating profit of approximately $2.4 billion and adjusted earnings of $4.01-$4.05 per share. Its adjusted free cash flow target is now approximately $1.5 billion, compared with the prior range of $1.50-$1.55 billion.
The company delivered a trailing four-quarter earnings surprise of 65.5%, on average. CECO stock has declined 3.9% year to date. The Zacks Consensus Estimate for CECO Environmental’s 2026 sales and EPS indicates growth of 72.8% and 173%, respectively, from the prior-year levels.
ATS Corporation (ATS - Free Report) holds a Zacks Rank #2 (Buy) at present. The company delivered a trailing four-quarter earnings miss of 2.4%, on average. ATS stock has fallen 31% year to date.
The Zacks Consensus Estimate for ATS Corp’s 2026 sales and EPS indicates a decline of 4.8% and 13.1%, respectively, from the prior-year levels.
Applied Industrial Technologies, Inc. (AIT - Free Report) carries a Zacks Rank of 2 at present. The company delivered a trailing four-quarter earnings surprise of 4.3%, on average. AIT stock has jumped 15.9% year to date.
The Zacks Consensus Estimate for Applied Industrial Technologies’ fiscal 2027 sales and EPS indicates growth of 6% and 9.6%, respectively, from the year-ago period’s levels.
View the Zacks #1 Rank List
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OTIS Q3 Earnings & Revenues Beat Estimates on Strong Service Growth
Key Takeaways
Otis Worldwide Corporation (OTIS - Free Report) reported third-quarter 2026 results, wherein adjusted earnings beat the Zacks Consensus Estimate but remained flat year over year. Net sales also surpassed the consensus mark and increased from the year-ago quarter.
OTIS' performance reflected strong Service growth, supported by modernization and repair activity, alongside improved New Equipment sales. Strong modernization orders and expanding backlog highlighted healthy demand across the business. However, weaker New Equipment profitability weighed on overall margins.
Following the results, OTIS’ shares declined 0.9% during today's pre-market trading session.
Inside OTIS' Q3 Headlines
Otis posted adjusted earnings of $1.05 per share, beating the Zacks Consensus Estimate of $1 by 5%. The bottom line was unchanged from the year-ago quarter.
Otis Worldwide Corporation Price and EPS Surprise
Otis Worldwide Corporation price-eps-surprise | Otis Worldwide Corporation Quote
Net sales of $3.91 billion surpassed the consensus mark of $3.85 billion by 1.7% and increased 6% from $3.69 billion in the prior-year period. Organic sales advanced 6%, driven by growth in both Service and New Equipment. Modernization orders increased 10% at constant currency, while modernization backlog expanded 20% year over year.
Adjusted operating profit slipped $6 million to $626 million from $632 million. The adjusted operating margin contracted 110 basis points (bps) to 16% from 17.1%, reflecting unfavorable segment performance, partly offset by a favorable business mix.
Segment Details of OTIS
Service: Net sales from the segment increased 8% year over year to $2.62 billion from $2.43 billion. Organic sales rose 7%, driven by broad-based demand across the business. Organic maintenance and repair sales increased 4%, while organic modernization sales jumped 20%. Our model estimated organic sales for the segment to grow 0.3%.
Segment operating profit increased to $633 million from $621 million a year ago. However, operating margin contracted 130 basis points (bps) to 24.2% from 25.5%. Higher labor costs, ongoing strategic investments and an unfavorable mix partly offset benefits from higher volumes, favorable pricing and employment-related cost reductions.
Service operating margin improved 100 bps sequentially. Management highlighted investments in field capability and AI-enabled pricing as contributors to double-digit modernization growth and high-single-digit repair growth.
New Equipment: Net sales increased 3% year over year to $1.3 billion from $1.26 billion. Organic sales also rose 3%, driven by low-teens growth in the Americas, mid-single-digit growth in EMEA and high-single-digit growth in Asia Pacific. This was partly offset by a more than 20% decline in China. Our model predicted organic sales for the New Equipment segment to increase 6.1%.
New Equipment orders increased 1% at constant currency, with growth across the Americas, EMEA and Asia Pacific partly offsetting a low-teens decline in China. Backlog increased 4% at both actual and constant currency.
Segment operating profit declined to $42 million from $59 million. Operating margin contracted 150 bps to 3.2% from 4.7%, primarily due to unfavorable pricing and mix, partly offset by productivity gains and higher volume.
OTIS' Cash Flow and Balance Sheet Update
Net cash provided by operating activities totaled $337 million, down from $374 million a year ago. Free cash flow declined to $298 million from $337 million, while adjusted free cash flow fell to $272 million from $337 million. Working-capital changes offset the benefit from higher net income.
During the first nine months of 2026, operating cash flow grew to $1.02 billion from $779 million. Adjusted free cash flow increased to $834 million from $766 million. Otis repurchased $807 million in shares and paid $498 million in common dividends during the period.
Cash and cash equivalents totaled $866 million at Sept. 30, 2026, compared with $1.1 billion at the end of 2025. Long-term debt increased to $7.05 billion from $6.9 billion over the same period.
Otis Maintains 2026 Sales and Earnings Outlook
The company reaffirmed its full-year net sales outlook of $15.1-$15.3 billion, implying approximately 4.6-6% year-over-year growth and expects organic sales growth in the low to mid-single digits. Organic Service sales are projected to increase in the mid to high-single digits, while organic New Equipment sales are expected to range from a low-single-digit decline to flat.
Otis continues to project adjusted operating profit of approximately $2.4 billion and adjusted earnings of $4.01-$4.05 per share. Its adjusted free cash flow target is now approximately $1.5 billion, compared with the prior range of $1.50-$1.55 billion.
OTIS' Zacks Rank & Key Picks
Otis currently carries a Zacks Rank #3 (Hold).
Here are some better-ranked stocks from the Industrial Products sector:
CECO Environmental Corp. (CECO - Free Report) sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The company delivered a trailing four-quarter earnings surprise of 65.5%, on average. CECO stock has declined 3.9% year to date. The Zacks Consensus Estimate for CECO Environmental’s 2026 sales and EPS indicates growth of 72.8% and 173%, respectively, from the prior-year levels.
ATS Corporation (ATS - Free Report) holds a Zacks Rank #2 (Buy) at present. The company delivered a trailing four-quarter earnings miss of 2.4%, on average. ATS stock has fallen 31% year to date.
The Zacks Consensus Estimate for ATS Corp’s 2026 sales and EPS indicates a decline of 4.8% and 13.1%, respectively, from the prior-year levels.
Applied Industrial Technologies, Inc. (AIT - Free Report) carries a Zacks Rank of 2 at present. The company delivered a trailing four-quarter earnings surprise of 4.3%, on average. AIT stock has jumped 15.9% year to date.
The Zacks Consensus Estimate for Applied Industrial Technologies’ fiscal 2027 sales and EPS indicates growth of 6% and 9.6%, respectively, from the year-ago period’s levels.