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OTIS Q2 Earnings Beat, Net Sales Miss, '24 Outlook Revised
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Otis Worldwide Corporation (OTIS - Free Report) reported mixed results in the second quarter of 2024. Its adjusted earnings topped the Zacks Consensus Estimate and grew year over year. The company reported better-than-expected earnings in the trailing seven quarters.
However, quarterly net sales missed the consensus mark and declined on a year-over-year basis.
After consistent organic sales growth for the last 14 quarters, the company’s organic sales declined in the quarter. The downtrend was mainly driven by the organic sales decline in its New Equipment segment due to a low single-digit sales decline in EMEA and a double-digit decline in China. Nonetheless, this headwind was offset to some extent by organic sales growth in the Service segment, due to the strength in maintenance and repair, and modernization.
Thanks to the continuous strength of its modernization strategy, the company witnessed order growth of more than 10% for eight consecutive quarters, leading to mid-teens backlog growth.
Otis has been leveraging its Service-driven and customer-centric business model as well as focusing on enhancing its operational performance and shareholder value. It intends to pursue its aims through its capital allocation strategy while focusing on achieving its ESG goals. Thanks to these accretive initiatives, the company witnessed mid-teens earnings per share (EPS) growth in the quarter and raised its EPS outlook for 2024.
Shares of this elevator and escalator manufacturing company lost 3.8% in the pre-market trading session on Jul 24.
Inside the Headlines
The company reported quarterly earnings of $1.06 per share, which surpassed the Zacks Consensus Estimate of $1.03 by 2.9% and increased 15.2% from the year-ago quarter’s 92 cents. The upside was mainly driven by a solid operational performance and effective tax rate improvement.
Net sales of $3.6 billion missed the consensus mark by 3.5% and declined 3.2% on a year-over-year basis. Organically, net sales declined 1.2% year over year. Currency headwinds impacted sales by 2.1%.
Otis Worldwide Corporation Price, Consensus and EPS Surprise
Adjusted operating margin expanded 110 basis points (bps) to 17% from the year-ago period’s level, backed by favorable segment performance and mix. Our model predicted the adjusted operating margin to expand 50 bps year over year to 16.4%.
Segment Details
New Equipment: This segment’s net sales of $1.42 billion fell 11.4% from the prior-year period. Organic sales declined 9.4%, which was accompanied by a 2.1% headwind from foreign exchange. Our model predicted organic sales for the New Equipment segment to decline 4.5%.
New Equipment orders were down 11% at constant currency. Growth in EMEA and Asia Pacific was more than offset by softness in the Americas and China. The segment’s backlog at constant currency declined 3% year over year.
Segment operating margin was up 30 bps year over year at 7.7%.
Service: The net sales of this segment increased 3% to $2.18 billion year over year. A 5.1% rise in organic sales and a 2.3% benefit from foreign exchange aided the top line. Organic maintenance and repair sales grew 4.9% and organic modernization sales rose 5.8% from the year-ago quarter. Our model predicted organic sales for the segment to grow 6.5%.
Modernization backlog at constant currency increased 17% year over year.
Segment operating margin registered an improvement of 110 bps year over year to 24.7%, driven by higher volume, favorable pricing and productivity, partially offset by annual wage inflation.
Financial Position
Otis had cash and cash equivalents of $942 million as of Jun 30, 2024, down from $1.27 billion reported in 2023-end. Long-term debt was $5.52 billion as of Mar 31, 2024, down from $6.87 billion in 2023-end.
For the six months ended Jun 30, net cash flows provided by operating activities were $479 million, down from $724 million a year ago.
Adjusted free cash flow (“FCF”) totaled $353 million, down from $434 million a year ago.
Revised 2024 Outlook
The company expects net sales between $14.3 billion and $14.5 billion compared with the prior mentioned $14.5-$14.8 billion.
Organic sales growth is projected to be 1-3%, down from the prior stated 3-5%. Organic New Equipment sales are expected to be down in the mid-single digits and organic Service sales are expected to be 6-7%.
Adjusted operating profit is anticipated between $2.40 billion and $2.45 billion, which is $160-$190 million at constant currency.
Adjusted EPS is anticipated between $3.85 and $3.90 compared with the prior mentioned $3.83-$3.90. The updated outlook indicates 9-10% year-over-year growth.
Adjusted FCF is expected between $1.5 billion and $1.6 billion.
PulteGroup Inc. (PHM - Free Report) reported stellar results in the second quarter of 2024, wherein earnings and revenues handily beat the Zacks Consensus Estimate. On a year-over-year basis, both the bottom and top lines increased.
PHM saw significant benefits from key factors, which drove its success. The company's balanced operating model resulted in increases in closings, average sales price and gross margin, which collectively led to a 19.3% increase in EPS. Effective management of sales price, pace and starts on a community-by-community basis enabled the company to achieve high returns on invested capital and equity, evidenced by a 27.1% return on equity over the past 12 months.
D.R. Horton, Inc. (DHI - Free Report) reported third-quarter fiscal 2024 (ended Jun 30, 2024) results, with earnings and revenues surpassing Zacks Consensus Estimate. On a year-over-year basis, both the bottom and top lines increased.
DHI now expects consolidated revenues in the range of $36.8-$37.2 billion compared with the prior expectation of $36.7-$37.7 billion. The company reported $35.5 billion in revenues in fiscal 2023. Homes closed are anticipated within 90,000-90,500 units compared with 89,000-91,000 units expected earlier.
KB Home (KBH - Free Report) reported impressive results in the second quarter of fiscal 2024 (ended May 31, 2024). Both earnings and revenues beat the Zacks Consensus Estimate. Shares of this leading homebuilder rose 2.2% in the after-market trading session on Jun 18.
On an encouraging note, KB Home’s earnings increased on a year-over-year basis despite a revenue decline. Leveraging the advantages of its Built to Order model, which provides buyers with choices, flexibility, and affordability, the company is confident in its ability to effectively navigate potential fluctuations in housing market conditions.
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OTIS Q2 Earnings Beat, Net Sales Miss, '24 Outlook Revised
Otis Worldwide Corporation (OTIS - Free Report) reported mixed results in the second quarter of 2024. Its adjusted earnings topped the Zacks Consensus Estimate and grew year over year. The company reported better-than-expected earnings in the trailing seven quarters.
However, quarterly net sales missed the consensus mark and declined on a year-over-year basis.
After consistent organic sales growth for the last 14 quarters, the company’s organic sales declined in the quarter. The downtrend was mainly driven by the organic sales decline in its New Equipment segment due to a low single-digit sales decline in EMEA and a double-digit decline in China. Nonetheless, this headwind was offset to some extent by organic sales growth in the Service segment, due to the strength in maintenance and repair, and modernization.
Thanks to the continuous strength of its modernization strategy, the company witnessed order growth of more than 10% for eight consecutive quarters, leading to mid-teens backlog growth.
Otis has been leveraging its Service-driven and customer-centric business model as well as focusing on enhancing its operational performance and shareholder value. It intends to pursue its aims through its capital allocation strategy while focusing on achieving its ESG goals. Thanks to these accretive initiatives, the company witnessed mid-teens earnings per share (EPS) growth in the quarter and raised its EPS outlook for 2024.
Shares of this elevator and escalator manufacturing company lost 3.8% in the pre-market trading session on Jul 24.
Inside the Headlines
The company reported quarterly earnings of $1.06 per share, which surpassed the Zacks Consensus Estimate of $1.03 by 2.9% and increased 15.2% from the year-ago quarter’s 92 cents. The upside was mainly driven by a solid operational performance and effective tax rate improvement.
Net sales of $3.6 billion missed the consensus mark by 3.5% and declined 3.2% on a year-over-year basis. Organically, net sales declined 1.2% year over year. Currency headwinds impacted sales by 2.1%.
Otis Worldwide Corporation Price, Consensus and EPS Surprise
Otis Worldwide Corporation price-consensus-eps-surprise-chart | Otis Worldwide Corporation Quote
Adjusted operating margin expanded 110 basis points (bps) to 17% from the year-ago period’s level, backed by favorable segment performance and mix. Our model predicted the adjusted operating margin to expand 50 bps year over year to 16.4%.
Segment Details
New Equipment: This segment’s net sales of $1.42 billion fell 11.4% from the prior-year period. Organic sales declined 9.4%, which was accompanied by a 2.1% headwind from foreign exchange. Our model predicted organic sales for the New Equipment segment to decline 4.5%.
New Equipment orders were down 11% at constant currency. Growth in EMEA and Asia Pacific was more than offset by softness in the Americas and China. The segment’s backlog at constant currency declined 3% year over year.
Segment operating margin was up 30 bps year over year at 7.7%.
Service: The net sales of this segment increased 3% to $2.18 billion year over year. A 5.1% rise in organic sales and a 2.3% benefit from foreign exchange aided the top line. Organic maintenance and repair sales grew 4.9% and organic modernization sales rose 5.8% from the year-ago quarter. Our model predicted organic sales for the segment to grow 6.5%.
Modernization backlog at constant currency increased 17% year over year.
Segment operating margin registered an improvement of 110 bps year over year to 24.7%, driven by higher volume, favorable pricing and productivity, partially offset by annual wage inflation.
Financial Position
Otis had cash and cash equivalents of $942 million as of Jun 30, 2024, down from $1.27 billion reported in 2023-end. Long-term debt was $5.52 billion as of Mar 31, 2024, down from $6.87 billion in 2023-end.
For the six months ended Jun 30, net cash flows provided by operating activities were $479 million, down from $724 million a year ago.
Adjusted free cash flow (“FCF”) totaled $353 million, down from $434 million a year ago.
Revised 2024 Outlook
The company expects net sales between $14.3 billion and $14.5 billion compared with the prior mentioned $14.5-$14.8 billion.
Organic sales growth is projected to be 1-3%, down from the prior stated 3-5%. Organic New Equipment sales are expected to be down in the mid-single digits and organic Service sales are expected to be 6-7%.
Adjusted operating profit is anticipated between $2.40 billion and $2.45 billion, which is $160-$190 million at constant currency.
Adjusted EPS is anticipated between $3.85 and $3.90 compared with the prior mentioned $3.83-$3.90. The updated outlook indicates 9-10% year-over-year growth.
Adjusted FCF is expected between $1.5 billion and $1.6 billion.
Zacks Rank & Recent Construction Releases
OTIS currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
PulteGroup Inc. (PHM - Free Report) reported stellar results in the second quarter of 2024, wherein earnings and revenues handily beat the Zacks Consensus Estimate. On a year-over-year basis, both the bottom and top lines increased.
PHM saw significant benefits from key factors, which drove its success. The company's balanced operating model resulted in increases in closings, average sales price and gross margin, which collectively led to a 19.3% increase in EPS. Effective management of sales price, pace and starts on a community-by-community basis enabled the company to achieve high returns on invested capital and equity, evidenced by a 27.1% return on equity over the past 12 months.
D.R. Horton, Inc. (DHI - Free Report) reported third-quarter fiscal 2024 (ended Jun 30, 2024) results, with earnings and revenues surpassing Zacks Consensus Estimate. On a year-over-year basis, both the bottom and top lines increased.
DHI now expects consolidated revenues in the range of $36.8-$37.2 billion compared with the prior expectation of $36.7-$37.7 billion. The company reported $35.5 billion in revenues in fiscal 2023. Homes closed are anticipated within 90,000-90,500 units compared with 89,000-91,000 units expected earlier.
KB Home (KBH - Free Report) reported impressive results in the second quarter of fiscal 2024 (ended May 31, 2024). Both earnings and revenues beat the Zacks Consensus Estimate. Shares of this leading homebuilder rose 2.2% in the after-market trading session on Jun 18.
On an encouraging note, KB Home’s earnings increased on a year-over-year basis despite a revenue decline. Leveraging the advantages of its Built to Order model, which provides buyers with choices, flexibility, and affordability, the company is confident in its ability to effectively navigate potential fluctuations in housing market conditions.