Why Is Otis Worldwide (OTIS) Up 4.4% Since Last Earnings Report?

A month has gone by since the last earnings report for Otis Worldwide (OTIS). Shares have added about 4.4% in that time frame, underperforming 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 the most recent earnings report in order to get a better handle on the important catalysts. Otis Worldwide's Q3 Earnings & Sales Miss Estimates, '24 View DownOtis Worldwide Corporation reported dismal results in the third quarter of 2024, with adjusted earnings and net sales missing the Zacks Consensus Estimate. The company reported lower-than-expected earnings in the quarter after four consecutive quarters of earnings beat. The top and bottom lines increased on a year-over-year basis.The quarterly results reflect soft contributions from the company’s New Equipment segment due to tepid demand trends, mainly in China. The impact of lower volume and unfavorable mix in this segment hurt the quarter’s results.The downtrend was, however, partially offset by sales growth in Asia Pacific and the Americas, along with favorable price, productivity and commodity mix. Also, notable contributions from the Service segment helped improve the results to some extent.Owing to the above-mentioned headwinds, the company’s lowered its 2024 outlook across key metrics.Inside OTIS’ HeadlinesThe company reported adjusted earnings of 96 cents per share, which missed the Zacks Consensus Estimate of 97 cents by 1%. The reported figure increased 1.1% from the year-ago quarter’s earnings per share (EPS) of 95 cents.Net sales of $3.55 billion missed the consensus mark by 1.3% but grew marginally by 0.7% on a year-over-year basis. Organically, net sales increased 1.2% year over year. Currency headwinds impacted sales by 0.8%.Adjusted operating margin remained flat year over year at 16.9%, attributable to favorable segment mix offset by New Equipment segment performance and headwinds in corporate costs.Segment Details of OTISNew Equipment: This segment’s net sales of $1.31 billion fell 8.8% from the prior-year period. Organic sales declined 8.2%, which was accompanied by a 0.7% headwind from foreign exchange.New Equipment orders were down 3% at constant currency. Growth in the Americas and Asia Pacific was more than offset by flat sales trends in Europe, the Middle East and Africa (EMEA) and softness in China. The segment’s backlog at constant currency declined 3% year over year. Segment operating margin was down 80 basis points year over year to 6.4%.Service: The net sales of this segment increased 7.2% year over year to $2.24 billion. A 7.7% rise in organic sales and a 0.8% benefit from foreign exchange aided the top line. Organic maintenance and repair sales increased 6.4% and organic modernization sales rose 13.7% from the year-ago quarter.Segment operating margin was flat year over year at 24.8%, due to higher volume, favorable pricing and productivity, partially offset by annual wage inflation.Financial Position of OTISOtis had cash and cash equivalents of $827 million as of Sept. 30, 2024, down from $1.27 billion reported in 2023-end. Long-term debt was $5.6 billion as of the third-quarter end, down from $6.87 billion in 2023-end.For the nine months ended Sept. 30, net cash flows provided by operating activities were $873 million, down from $1.03 billion a year ago. Adjusted free cash flow (FCF) totaled $381 million in the third quarter, up from $274 million a year ago.OTIS’ Revised 2024 OutlookThe company now expects net sales to be approximately $14.2 billion compared with the prior expected range of $14.3-$14.5 billion. Organic sales growth is now projected to be about 1.5% compared with prior expected band of 1-3%.Organic New Equipment sales are now expected to be down between mid to high single digit compared with the prior expected decline in mid-single digits. Organic Service sales are now expected to be up approximately 6.5% compared with the prior expected range of 6-7%.Adjusted operating profit is currently anticipated to be around $2.375 billion, down from the prior expected range of $2.40-$2.45 billion. The new guidance is up about $105 million from prior year (up $140 million at constant currency). Adjusted EPS is now anticipated to be about $3.85 compared with the prior expected range of $3.85-$3.90.Adjusted FCF is now expected to be between $1.4 billion and $1.5 billion compared with the earlier expected range of $1.5-$1.6 billion.How Have Estimates Been Moving Since Then?In the past month, investors have witnessed a downward trend in fresh estimates.VGM ScoresAt this time, Otis Worldwide has a subpar Growth Score of D, though it is lagging a bit 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 F. If you aren't focused on one strategy, this score is the one you should be interested in.OutlookEstimates 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.Performance of an Industry PlayerOtis Worldwide belongs to the Zacks Building Products - Miscellaneous industry. Another stock from the same industry, Armstrong World Industries (AWI), has gained 14.8% over the past month. More than a month has passed since the company reported results for the quarter ended September 2024.Armstrong World Industries reported revenues of $386.6 million in the last reported quarter, representing a year-over-year change of +11.3%. EPS of $1.81 for the same period compares with $1.60 a year ago.Armstrong World Industries is expected to post earnings of $1.37 per share for the current quarter, representing a year-over-year change of +12.3%. Over the last 30 days, the Zacks Consensus Estimate has changed +1.9%.Armstrong World Industries has a Zacks Rank #2 (Buy) based on the overall direction and magnitude of estimate revisions. 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Click to get this free report Otis Worldwide Corporation (OTIS): Free Stock Analysis Report Armstrong World Industries, Inc. (AWI): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks