Overview

• U.S. elevator maker's Q2 sales rose 7%, beating analyst expectations

• Adjusted EPS for Q2 beat analyst expectations but declined 4% yr/yr

• Company repurchased about $400 mln in shares during the quarter

Outlook

• Otis says strong backlog in modernization and new equipment supports expectation for continued growth

• Company remains confident in long-term growth opportunities across its Service portfolio

Result Drivers

• SERVICE GROWTH - Organic Service sales rose 9%, with double-digit increases in modernization and repair, and accelerating maintenance trends

• NEW EQUIPMENT WEAKNESS - New Equipment net sales were flat and organic sales declined 1%, though the company said this was a sequential improvement

• MARGIN PRESSURE - Adjusted operating profit and margin declined due to ongoing investment in Service growth initiatives, higher labor and material costs, and unfavorable segment performance

Key Details

Metric	Beat/Miss	Actual	Consensus Estimate
Q2 Sales	Beat	$3.90 bln	$3.76 bln (6 Analysts)
Q2 Adjusted EPS	Beat	$1.01	$1.007 (6 Analysts)
Q2 EPS		$1.12

Analyst Coverage

• The current average analyst rating on the shares is "buy" and the breakdown of recommendations is 7 "strong buy" or "buy", 9 "hold" and no "sell" or "strong sell"

• The average consensus recommendation for the heavy electrical equipment peer group is "buy"

• Wall Street's median 12-month price target for Otis Worldwide Corp is $97.00, about 34.8% above its July 21 closing price of $71.95

• The stock recently traded at 16 times the next 12-month earnings vs. a P/E of 17 three months ago

Reuters Recommended Reads

• July 22 - Finland's Kone posts higher Q2 sales, flags China weakness

• July 21 - Switzerland's Schindler H1 EBIT margin rises; reaffirms outlook

• July 21 - 3M boosts annual profit forecast driven by resilient industrial unit

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