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Otis' (OTIS) Stock up on Q2 Earnings Beat, Sales Lag Estimates
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Otis Worldwide Corporation (OTIS - Free Report) reported strong earnings in second-quarter 2022. Its earnings surpassed the Zacks Consensus Estimate and rose on a year-over-year basis. However, sales declined from the year-ago quarter’s figure and lagged the consensus mark.
Shares of this elevator and escalator manufacturing company inched up 0.4% in the pre-market trading session on Jul 27.
President & CEO of Otis, Judy Marks, stated, "Otis completed a strong first half, delivering a solid second quarter with record New Equipment orders and the best maintenance portfolio growth in over a decade. We grew adjusted EPS low teens, driven by strong organic growth in the Service business and productivity performance in both segments that helped to overcome the impact of lockdowns in China, higher commodity prices and significant headwinds from the strengthening of the US Dollar."
Earnings & Revenue Discussion
The company reported quarterly earnings of 86 cents per share, surpassing the consensus estimate of 78 cents by 10.3% and increasing 11.7% from the year-ago quarter’s figure of 72 cents. The upside was mainly driven by operational improvement, reduced effective tax rate, a lower share count and the Zardoya transaction, partially offset by a 6 cents headwind from foreign exchange translation.
Otis Worldwide Corporation Price, Consensus and EPS Surprise
Net sales of $3.49 billion missed the consensus mark of $3.54 million by 1.5% and declined 5.8% on a year-over-year basis. Adjusted net sales fell 4.8% year over year to $3.45 billion. Organically, net sales rose 4% year over year for the quarter.
Adjusted operating margin expanded 20 basis points (bps) to 15.7% from the year-ago period’s levels, with margin expansion in Service.
Segment Details
New Equipment’s net sales of $1.53 billion fell 11.2% and adjusted net sales of $1.51 billion dropped 9.3% from the prior-year period’s levels. The downside was caused by a 5% decline in organic sales and a 3.8% reduction in foreign exchange. Organic sales were up in high-single-digit in the Asia Pacific and low-single-digit in the EMEA, which was more than offset by a mid-single-digit decline in the Americas and low teens in China.
New Equipment orders were up 16.5% at constant currency, backed by 50% growth in the Americas and almost 30% growth in EMEA. Yet, a mid-single-digit decline in Asia reduced the total segment orders. New equipment backlog increased 6% and the adjusted backlog rose 10% at constant currency from the prior year.
Adjusted operating margin contracted 100 bps year over year to 7.5% due to commodity headwinds and lower volume.
Service’s net sales fell 1% to $1.95 billion and adjusted revenues dipped 1.1% year over year. A 5.2% rise in organic sales was offset by a 6.5% headwind from foreign exchange. Organic maintenance and repair sales grew 4.9%, and organic modernization sales rose 6.4% from the prior-year quarter. Adjusted operating margin registered an improvement of 50 bps year over year to 23.1%, driven by higher volume, favorable pricing and productivity, partially offset by labor inflation.
Financial Position
Otis had cash and cash equivalents of $1.22 billion as of Jun 30, 2022. This compares unfavorably with 2021-end numbers of $1.57 billion. Long-term debt was $6.6 billion as of Jun 30, 2022, up from $7.25 billion in the 2021-end.
Net cash flows provided by operating activities were $353 million for the second quarter, down from $533 million a year ago. Free cash flow totaled $326 million for the quarter, down from $493 million a year ago.
2022 Guidance Revised
For 2022, the company expects adjusted net sales to be within $13.6-$13.8 billion, lower than the $14.1-$14.3 billion projected earlier. The new projection indicates a 2-3% year-over-year decline. Organic sales growth is likely to be 2.5-3.5% (down 0.5-1% for New Equipment but up 5.5-6.5% for Service). Earlier, it projected organic sales growth of 3-4%. Adjusted operating profit is now projected within $2.1-$2.2 billion ($2.2-$2.25 billion anticipated earlier), up $5 million to down $25 million in actual currency and $120-$150 million at constant currency.
Adjusted earnings per share are anticipated to be $3.17-$3.21, suggesting 7-9% year-over-year growth. This is down from the prior projection of $3.22-$3.27 per share. The adjusted effective tax rate is likely to be 26.5-26.7%. Free cash flow is expected to be nearly $1.6 billion.
Zacks Rank
Otis currently carries a Zacks Rank #5 (Strong Sell).
DHI also lowered its revenue guidance for the full year, given the expected completion dates of homes under construction and current market conditions.
Both UFPI’s earnings and net sales beat the Zacks Consensus Estimate and increased on a year-over-year basis.
Acuity Brands, Inc. (AYI - Free Report) reported solid third-quarter fiscal 2022 results. The top and the bottom line surpassed the Zacks Consensus Estimate and improved from the prior-year quarter’s levels.
The upside in AYI’s quarterly result was backed by higher sales from both of its segments and price increases and product and productivity improvement.
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Otis' (OTIS) Stock up on Q2 Earnings Beat, Sales Lag Estimates
Otis Worldwide Corporation (OTIS - Free Report) reported strong earnings in second-quarter 2022. Its earnings surpassed the Zacks Consensus Estimate and rose on a year-over-year basis. However, sales declined from the year-ago quarter’s figure and lagged the consensus mark.
Shares of this elevator and escalator manufacturing company inched up 0.4% in the pre-market trading session on Jul 27.
President & CEO of Otis, Judy Marks, stated, "Otis completed a strong first half, delivering a solid second quarter with record New Equipment orders and the best maintenance portfolio growth in over a decade. We grew adjusted EPS low teens, driven by strong organic growth in the Service business and productivity performance in both segments that helped to overcome the impact of lockdowns in China, higher commodity prices and significant headwinds from the strengthening of the US Dollar."
Earnings & Revenue Discussion
The company reported quarterly earnings of 86 cents per share, surpassing the consensus estimate of 78 cents by 10.3% and increasing 11.7% from the year-ago quarter’s figure of 72 cents. The upside was mainly driven by operational improvement, reduced effective tax rate, a lower share count and the Zardoya transaction, partially offset by a 6 cents headwind from foreign exchange translation.
Otis Worldwide Corporation Price, Consensus and EPS Surprise
Otis Worldwide Corporation price-consensus-eps-surprise-chart | Otis Worldwide Corporation Quote
Net sales of $3.49 billion missed the consensus mark of $3.54 million by 1.5% and declined 5.8% on a year-over-year basis. Adjusted net sales fell 4.8% year over year to $3.45 billion. Organically, net sales rose 4% year over year for the quarter.
Adjusted operating margin expanded 20 basis points (bps) to 15.7% from the year-ago period’s levels, with margin expansion in Service.
Segment Details
New Equipment’s net sales of $1.53 billion fell 11.2% and adjusted net sales of $1.51 billion dropped 9.3% from the prior-year period’s levels. The downside was caused by a 5% decline in organic sales and a 3.8% reduction in foreign exchange. Organic sales were up in high-single-digit in the Asia Pacific and low-single-digit in the EMEA, which was more than offset by a mid-single-digit decline in the Americas and low teens in China.
New Equipment orders were up 16.5% at constant currency, backed by 50% growth in the Americas and almost 30% growth in EMEA. Yet, a mid-single-digit decline in Asia reduced the total segment orders. New equipment backlog increased 6% and the adjusted backlog rose 10% at constant currency from the prior year.
Adjusted operating margin contracted 100 bps year over year to 7.5% due to commodity headwinds and lower volume.
Service’s net sales fell 1% to $1.95 billion and adjusted revenues dipped 1.1% year over year. A 5.2% rise in organic sales was offset by a 6.5% headwind from foreign exchange. Organic maintenance and repair sales grew 4.9%, and organic modernization sales rose 6.4% from the prior-year quarter. Adjusted operating margin registered an improvement of 50 bps year over year to 23.1%, driven by higher volume, favorable pricing and productivity, partially offset by labor inflation.
Financial Position
Otis had cash and cash equivalents of $1.22 billion as of Jun 30, 2022. This compares unfavorably with 2021-end numbers of $1.57 billion. Long-term debt was $6.6 billion as of Jun 30, 2022, up from $7.25 billion in the 2021-end.
Net cash flows provided by operating activities were $353 million for the second quarter, down from $533 million a year ago. Free cash flow totaled $326 million for the quarter, down from $493 million a year ago.
2022 Guidance Revised
For 2022, the company expects adjusted net sales to be within $13.6-$13.8 billion, lower than the $14.1-$14.3 billion projected earlier. The new projection indicates a 2-3% year-over-year decline. Organic sales growth is likely to be 2.5-3.5% (down 0.5-1% for New Equipment but up 5.5-6.5% for Service). Earlier, it projected organic sales growth of 3-4%. Adjusted operating profit is now projected within $2.1-$2.2 billion ($2.2-$2.25 billion anticipated earlier), up $5 million to down $25 million in actual currency and $120-$150 million at constant currency.
Adjusted earnings per share are anticipated to be $3.17-$3.21, suggesting 7-9% year-over-year growth. This is down from the prior projection of $3.22-$3.27 per share. The adjusted effective tax rate is likely to be 26.5-26.7%. Free cash flow is expected to be nearly $1.6 billion.
Zacks Rank
Otis currently carries a Zacks Rank #5 (Strong Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Some Recent Construction Releases
D.R. Horton, Inc.’s (DHI - Free Report) third-quarter fiscal 2022 earnings beat the Zacks Consensus Estimate, but revenues missed the same.
DHI also lowered its revenue guidance for the full year, given the expected completion dates of homes under construction and current market conditions.
UFP Industries, Inc. (UFPI - Free Report) reported stellar second-quarter 2022 results.
Both UFPI’s earnings and net sales beat the Zacks Consensus Estimate and increased on a year-over-year basis.
Acuity Brands, Inc. (AYI - Free Report) reported solid third-quarter fiscal 2022 results. The top and the bottom line surpassed the Zacks Consensus Estimate and improved from the prior-year quarter’s levels.
The upside in AYI’s quarterly result was backed by higher sales from both of its segments and price increases and product and productivity improvement.