Elevator Company Otis' Q3: 5.4% Revenue Growth, EPS Beat, Raised FY23 EPS Outlook & More

Otis Worldwide Corp OTIS reported Q3 2023 sales growth of 5.4% Y/Y to $3.52 billion, +5.2% Y/Y on an organic basis, in line with the consensus.

Adjusted operating profit increased to $595 million from $543 million, and the margin expanded by 60 bps to 16.9%, led by favorable Service performance and segment mix.

New Equipment sales of $1.44 billion fell 0.8% Y/Y. Adjusted operating margin remained flat Y/Y at 7.2%.

New Equipment orders declined 10% Y/Y at constant currency due to weakness in the Americas and China. The new equipment backlog grew by low-single digits in Q3.

The Farmington, Connecticut-based company's maintenance portfolio units increased by 4.2%; Mod orders were up 13% Y/Y, and backlog was up 15% Y/Y at constant currency.

Adjusted EPS improved to $0.95 (+18.8% Y/Y), beating the consensus of $0.87.

Otis's cash flow from operations of $306 million for the quarter increased $67 million Y/Y, and free cash flow was $272 million.

"Otis delivered strong results in the third quarter, highlighted by organic sales growth in both segments, 60 basis points of adjusted operating profit margin expansion and high-teens adjusted EPS growth. Emphasizing the consistent performance of our Service-driven business model, this quarter marks the eleventh consecutive quarter of Service organic sales growth, the fourth of maintenance portfolio growth above 4% and the fifth of modernization orders growth above 10%. We head into the last quarter of 2023 from a position of strength, as our strategy has been resilient through macro volatility, giving us the confidence to once again raise our EPS guidance," said Judy Marks, Chair, CEO & President.

FY23 Outlook: Otis revised its outlook for adjusted net sales to ~$14.1 billion (from $14.0 billion-$14.3 billion) versus the consensus of $14.19 billion, and organic sales to up ~5.5% (from up 4.5% - 6%). 

It revised guidance for adjusted operating profit to ~$2.265 billion (from $2.25 billion-$2.28 billion) and adjusted EPS to ~$3.52 (from $3.45-$3.50) vs. the consensus of $3.49.

OTIS sees a free cash flow of ~$1.5 billion (vs. $1.5 billion-$1.55 billion earlier) with a conversion of 105% of GAAP net income and share repurchases of $800 million.

Price Action: OTIS shares are trading lower by 1.64% at $76.00 premarket on the last check Wednesday.