Otis Worldwide Clocks 7% Sales Growth In Q2, Raises 2023 Outlook

Otis Worldwide Corp OTIS reported second-quarter 2023 sales growth of 6.7% year-over-year to $3.72 billion, +7.7% on an adjusted basis and +9.5% on an organic basis, beating the consensus of $3.58 billion.

Adjusted EPS improved to $0.92 (+7% Y/Y), beating the consensus of $0.86.

Adjusted operating profit increased 9% Y/Y to $590 million, and the margin expanded by 20 bps to 15.9%.

New Equipment sales of $1.31 billion increased 4.6% Y/Y and +6.3% on an adjusted basis. Adjusted operating margin contracted 10 bps to 7.4%.

New Equipment orders were down 12% Y/Y at constant currency, and the adjusted backlog increased 5% Y/Y at constant currency.

Service sales of $2.12 billion (+9.4% Y/Y), an 8.8 % increase on an adjusted basis. Adjusted operating profit margin expanded by 50 bps to 23.6%.

Otis's cash from operations of $446 million for the quarter increased $93 million Y/Y, and free cash flow was $409 million.

The Farmington, Connecticut-based company's maintenance portfolio units increased by 4.2%; 2Q Mod orders were up 16%, and backlog was up 14% at constant currency.

Otis CEO Judy Marks cited "strong performance" in the first half of the year for raising guidance, "both top and bottom line, and increasing our share repurchases."

The company launched its UpLift program to improve its operating model, with expected cost savings of $150 million within two years.

FY23 Outlook, raised: Otis revised its outlook and now expects Adjusted net sales of $14.billion-$14.3 billion (prior view $13.9 billion-$14.2 billion) versus the consensus of $14.05 billion, and Organic sales up 4.5% - 6%. 

It expects adjusted operating profit of $2.25 billion-$2.28 billion (prior $2.2 billion-$2.3 billion) and Adjusted EPS of $3.45-$3.50 (prior $3.40-$3.50) versus the consensus of $3.45.

OTIS sees a free cash flow of $1.5 billion-$1.55 billion with a conversion of 105% to 115% of GAAP net income and Share repurchases of $800 million.

Price Action: OTIS shares are trading lower by 0.08% at $87.50 premarket on Wednesday.