A month has gone by since the last earnings report for Otis Worldwide (OTIS Quick QuoteOTIS - Free Report) . Shares have added about 2.9% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Otis Worldwide due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Otis Worldwide Earnings Miss Estimates in Q4, Net Sales Top

Otis has reported mixed results in the fourth quarter of 2024, wherein adjusted earnings missed the Zacks Consensus Estimate while net sales topped the same. This is the company’s second consecutive earnings miss, after beating expectations 18 straight times in the trailing 19 quarters. Notably, the top and bottom lines grew on a year-over-year basis..

The quarterly results reflect year-over-year growth in contributions from the Service segment, driven by increased trends in organic maintenance and repair sales and organic modernization sales. On the other hand, the soft sales trend in the New Equipment segment due to declines in China somewhat hindered the growth.

Moreover, favorable pricing and productivity, including the benefits from UpLift, aided the bottom line in the quarter. Moving forward into 2025, Otis aims to continue focusing on innovation and implementing other strategic initiatives to improve its growth momentum along with ensuring shareholder value and operational efficiency.

Inside Headlines

The company reported adjusted earnings of 93 cents per share, which missed the Zacks Consensus Estimate of 95 cents by 2.1%. The reported figure increased 6.9% from the year-ago quarter’s earnings per share (EPS) of 87 cents.

Net sales of $3.68 billion marginally topped the consensus mark of $3.65 by 0.8% and grew 1.5% on a year-over-year basis. Organically, net sales increased 1.9% year over year. Currency headwinds impacted sales by 0.8%.

Adjusted operating margin expanded 30 basis points (bps) year over year to 15.9%, attributable to favorable Service segment performance and mix.

Segment Details

New Equipment: This segment’s net sales of $1.36 billion fell 7.4% from the prior-year period. Organic sales declined 6.8%, which was accompanied by a 0.7% headwind from foreign exchange.

New Equipment orders were down 4% at constant currency. Growth in the Americas and Asia Pacific was more than offset by a high single-digit sales decline in Europe, the Middle East and Africa (EMEA) and a more than 20% decline in China. The segment’s backlog decreased 7% in actual currency and 4% in constant currency.

Segment operating margin contracted 140 bps year over year to 4.7%. The downtrend was due to impacts of lower volume and unfavorable mix, which was partially offset by price, productivity (including the benefits from UpLift) and commodity tailwinds.

Service: The net sales of this segment increased 7.6% year over year to $2.32 billion. A 7.8% rise in organic sales and a 0.7% benefit from foreign exchange aided the top line. Organic maintenance and repair sales increased 5.6% and organic modernization sales rose 17.5% from the year-ago quarter. Modernization backlog at constant currency increased 13% year over year.

Segment operating margin expanded 50 bps year over year to 24.5%, due to higher volume, favorable pricing and productivity (including the benefits from UpLift), partially offset by annual wage inflation.

2024 Highlights

Otis Worldwide reported annual revenues of $14.26 billion, up 0.4% from $14.21 billion in 2023. Organic net sales growth was 1.4% year over year.

The adjusted EPS during the year increased to $3.83 from $3.54 reported a year ago.

Adjusted operating margin expanded 50 bps year over year to 16.5% .

Financial Position

Otis Worldwide had cash and cash equivalents of $2.3 billion as of Dec. 31, 2024, up from $1.27 billion reported in 2023-end. Long-term debt increased to $6.97 billion as of the fourth-quarter end from $6.87 billion in 2023-end.

In 2024, net cash flows provided by operating activities were $1.56 billion, down from $1.63 billion a year ago.

Adjusted free cash flow (FCF) totaled $1.57 billion in 2024, up from $1.53 billion a year ago.

Otis Provides 2025 Outlook

The company expects net sales to be between $14.1 billion and $14.4 billion, reflecting the range from down 1% to up 1%. Organic sales growth is projected to be between 2% and 4%. Organic New Equipment sales are expected to be down between 1% and 4%. Organic Service sales are expected to be up in the range of 6-7%.

Adjusted operating profit is anticipated to be between $2.4 billion and $2.5 billion. This reflects increases between $120 and $150 million at constant currency and $55 and $105 million at actual currency.

Adjusted EPS is anticipated between $4 and $4.10, indicating 4-7% year-over-year growth.

Adjusted FCF is expected to be approximately $1.6 billion. Otis expects the adjusted effective tax rate to be approximately 24.8%.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision.

The consensus estimate has shifted -5.23% due to these changes.

VGM Scores

Currently, Otis Worldwide has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Otis Worldwide has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.