Key Takeaways:
Otis Worldwide Corp. reported second-quarter net sales of $3.9 billion, topping the $3.72 billion consensus estimate, as service revenue growth accelerated to its highest level since the company's 2020 spinoff from United Technologies.
"Service organic sales of 9 percent matched the highest level since spin, with strong double-digit growth in modernization and repair and accelerating maintenance trends," the company said in its earnings release Tuesday.
Service net sales rose 11 percent to $2.49 billion, with organic growth of 9 percent, while New Equipment sales were flat at $1.24 billion, with organic sales down 1 percent — an improvement from the prior quarter's 3 percent decline. Modernization orders climbed 9 percent at constant currency, and the modernization backlog expanded 26 percent on the same basis, signaling sustained demand for elevator and escalator upgrades.
Adjusted operating profit fell $25 million from a year earlier, reflecting elevated labor and material costs, investments in field resources and an unfavorable mix toward lower-value New Equipment units. The adjusted operating margin in the Service segment contracted 100 basis points to 23.9 percent, while New Equipment margin narrowed 180 basis points to 3.5 percent, according to the company's filings. Otis generated operating cash flow of $267 million and adjusted free cash flow of $290 million in the quarter, and returned about $400 million to shareholders through share repurchases, bringing the first-half total to roughly $800 million.
The results show Otis is capturing pricing power and recurring revenue in its higher-margin Service business even as New Equipment faces headwinds from China and broader Asia Pacific demand softness. The 26 percent constant-currency modernization backlog growth provides multi-quarter revenue visibility. Investors will watch the company's July 22 earnings call for updated margin guidance and commentary on tariff exposure and Middle East project delays.
This article is for informational purposes only and does not constitute investment advice.
