Earnings Results: • Mid-single-digit organic sales growth driven by Service business • Adjusted operating margins expanded by 80 basis points • Service and New Equipment operating profit margins expanded 70 and 20 basis points respectively • Adjusted EPS grew 10% • Repurchased $300 million of shares in Q1 • Announced 14.7% increase to quarterly dividend
Future Guidance: • Raised adjusted operating profit outlook by $10 million from low end of prior outlook • Adjusted EPS expected to be $3.83 to $3.90, up $0.03 from low end of prior guide • Expect to achieve adjusted free cash flow of approximately $1.6 billion • Raising target share repurchases to approximately $1 billion for 2024 • Acquiring remaining minority interest in Nippon Otis in Japan for ~$70 million
Otis delivered solid first quarter results, demonstrating the continued strength of its service-driven business model. Despite challenging new equipment market conditions, especially in China, Otis achieved mid-single-digit organic sales growth driven by its Service business. Adjusted operating margins expanded, with both Service and New Equipment margins improving. The company repurchased shares and announced a significant dividend increase, emphasizing its commitment to delivering shareholder value.
Looking ahead, Otis raised its adjusted operating profit and EPS outlook for the full year. It expects to generate strong free cash flow of $1.6 billion and is increasing its share repurchase target to $1 billion. The company is also acquiring full ownership of Nippon Otis in Japan.
While new equipment markets remain soft, Otis continues to see strength in its Service business. Maintenance portfolio growth remains above 4% and the Modernization business is expanding rapidly with strong order and backlog growth. However, market conditions in China remain very competitive with ongoing pricing pressure.
Overall, the tone from management was positive, highlighting Otis’ resilient business model, operational execution, and cash generation capabilities. They remain confident in their ability to navigate near-term headwinds while investing for long-term growth, especially in the Service business.
Notable quotes: • “Otis started the year off with a solid first quarter, again confirming and demonstrating the continued strength of our Service-driven business model.” - Judith Marks, Chair, CEO and President
• “Growing our portfolio, leveraging our steady New Equipment and expanding more backlog and ramping on the UpLift program, alongside continued operational performance, set us up well cheaper financial outlook and returned $1.6 billion cash back to shareholders.” - Anurag Maheshwari, Executive Vice President and CFO