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Otis Worldwide Reports First Quarter 2025 Results

Otis Worldwide Corporation (NYSE: OTIS) has unveiled its financial performance for the first quarter of 2025, reflecting a robust expansion within its service segment. With net sales recorded at $3.3 billion, a 1% increase was noted, while organic sales remained steady at a flat growth rate compared to the previous year. In a notable deviation, the company's earnings per share (EPS) stood at $0.61, marking a 29% decline year-over-year (YoY), attributed largely to transformation costs and separation-related adjustments, yet adjusted EPS saw a 5% rise to $0.92.

Performance Overview

Service Segment Highlights

The service segment emerged as a stronghold for Otis, experiencing a mid-single-digit organic sales growth of 4%, which contributed significantly to the overall profit margins. The operating profit for this segment was $537 million, growing $14 million at actual currency—indicative of a successful strategy focusing on modernization and maintenance. Noteworthy is the impressive 12% increase in modernization orders, which effectively led to a mid-teens growth in the backlog, positioning Otis for future success throughout the year.

Chair and CEO Judy Marks stated, "Otis delivered solid performance supported by the strength of our Service segment, which contributed mid-single digit organic sales growth and 40 basis points of operating profit margin expansion." This sentiment underscores the strategy that has propelled Otis to achieve a significant increase in its maintenance portfolio units, lifted by a healthy 4% contribution.

New Equipment Performance

Conversely, the new equipment segment saw a downturn, with net sales decrease of 9% YoY, totaling $1.2 billion. Factors impacting this downturn included more than a 20% decline in sales in China, outweighing the 10% organic growth noted in the Asia Pacific region. The overall segment operating profit decreased to $66 million, reflecting adverse fluctuations in volume and mix, despite some productivity benefits.

Cash Flow and Repurchase Strategies

The first quarter also demonstrated Otis's commitments to maintaining liquidity, with a GAAP cash flow from operations of $190 million and an adjusted free cash flow of $186 million. Share repurchase activities reflected the company's robust financial position, with about $250 million dedicated to buybacks during this quarter.

Future Outlook

Otis has revised its full-year outlook, projecting net sales between $14.6 to $14.8 billion, an increase of 3 to 4%. The revised expectations include organic service sales growth of 5 to 7%, while organic new equipment sales are anticipated to range from a decline of 1 to 4%. Adjusted operating profit is estimated to rise between $2.4 to $2.5 billion, with an adjusted EPS set in the range of $4.00 to $4.10.

Conclusion

Despite encountering challenges in its new equipment segment, Otis's focus on modernization, a strong service portfolio, and strategic financial management have allowed the company to not only navigate the complexities of the market but also to deliver continued value to its shareholders. As Otis continues to position itself as a leader in the elevator and escalator industry, its adaptive strategies and commitment to evolution remain crystal clear. Investors and stakeholders alike are advocating for this trajectory as the company heads further into 2025.