Otis Worldwide Reports Mixed Q2 Results, Lowers FY22 Guidance

Otis Worldwide Corp OTIS reported a second-quarter FY22 sales decline of 5.8% year-over-year to $3.49 billion, +0.4% on an organic basis, missing the consensus of $3.60 billion.
Adjusted EPS improved to $0.86 from $0.77 in 2Q21, above the consensus of $0.78.
New Equipment sales of $1.53 billion, fell 11.2% Y/Y. New Equipment orders were up 16.5% at constant currency. New equipment backlog increased 6% Y/Y and the segment adjusted operating margin was 7.5%, down by 100 bps.
Service sales of $1.95 billion (-1.0% Y/Y), a 5.2% increase on an organic basis. Adjusted operating profit margin expanded by 50 bps to 23.1%.
The company's adjusted operating profit declined by 3.7% Y/Y to $541 million, and the corresponding margin was 15.7%, up 20 bps.
Otis generated cash from operating activities year-to-date was $857 million, compared to $1.12 billion a year ago. Free cash flow was $800 million. It held cash and equivalents of $1.22 billion as of June 30, 2022.
During the quarter, OTIS completed the delisting of Zardoya Otis and reached an agreement to divest Russia business, with closing expected imminently.
FY22 Outlook: Otis expects Adjusted net sales of $13.6 billion - $13.8 billion (prior expectation ~$14.1 billion - $14.3 billion) and Organic sales up 2.5% - 3.5% (prior view 3% - 4%) versus the consensus of $14.17 billion.
It expects adjusted operating profit of $2.1 billion - $2.2 billion (prior expectation $2.2 billion - $2.25 billion), and Adjusted EPS of $3.17 - $3.21 (prior $3.22 - $3.27) versus the consensus of $3.23.
OTIS sees a free cash flow of ~$1.6 billion with a conversion of ~125% of GAAP net income.
Price Action: OTIS shares traded higher by 3.82% at $75.50 on the last check Wednesday.

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