Otis Worldwide Corporation 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.
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
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.
Following the results, OTIS stock lost 3% in Wednesday’s pre-market trading session.
Inside OTIS’ 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%.
Otis Worldwide Corporation Price, Consensus and EPS Surprise
Otis Worldwide Corporation price-consensus-eps-surprise-chart | Otis Worldwide Corporation Quote
Adjusted operating margin expanded 30 basis points (bps) year over year to 15.9%, attributable to favorable Service segment performance and mix. Our model predicted the adjusted operating margin to expand 80 bps year over year to 16.4%.
Segment Details of OTIS
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. Our model predicted organic sales for the New Equipment segment to decline 5.6%.
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. Our model predicted organic sales for the segment to grow 6.9%. 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 of OTIS
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 of OTIS
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 $4.00 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%.
OTIS' Zacks Rank & Recent Construction Releases
Otis Worldwide currently carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
D.R. Horton, Inc. DHI reported first-quarter fiscal 2025 (ended Dec. 31, 2024) results, with earnings and revenues beating Zacks Consensus Estimate but decreasing on a year-over-year basis. Despite rising home inventories, the supply of affordable homes remains constrained, while favorable demographics continue to drive housing demand.
To address affordability challenges and stimulate sales, the company leveraged incentives such as mortgage rate buydowns. Additionally, D.R. Horton focused on offering smaller, affordable floor plans to align with the needs of cost-conscious homebuyers. DHI expects consolidated 2024 revenues to be in the range of $36-$37.5 billion compared with $36.8 billion in fiscal 2023. Homes closed are anticipated to be within 90,000-92,000 units.
KB Home KBH posted impressive fiscal fourth-quarter 2024 results, wherein both revenues and earnings surpassed expectations. On a year-over-year basis, both metrics increased, highlighting its resilience in a fluctuating housing market.
KBH’s results underscore the effectiveness of its strategy, driven by faster build times and a strong appetite for homeownership despite mortgage rate pressures. However, challenges such as mortgage rate headwinds and potential regulatory shifts could temper the pace of growth. While challenges remain, its strong order book and expanded community count suggest a solid growth trajectory for 2025.
Acuity Brands, Inc. AYI reported mixed results in the first quarter of fiscal 2025 (ended Nov. 30, 2024). Earnings exceeded the Zacks Consensus Estimate, but net sales were below the same. Earnings beat the consensus mark for the 19th consecutive quarter. Solid contributions from the Intelligent Spaces segment and the company's focus on product vitality and innovation helped AYI drive sales and improve profitability.
For fiscal 2025, Acuity Brands expects net sales to be between $4.3 billion and $4.5 billion (indicating growth from $3.84 billion reported in fiscal 2024), with adjusted EPS in the range of $16.50-$18.00 (depicting growth from $15.56 reported in fiscal 2024). The company also plans to allocate capital judiciously, prioritizing investments in core businesses and M&A opportunities while repaying acquisition-related debt within 12-18 months.
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