Otis Delivers Solid Service Growth, Reaffirms 2025 EPS Outlook
Otis (NYSE: OTIS) Navigates Mixed Market, Service Sector Drives Growth
In a complex economic landscape, Otis Worldwide Corporation (NYSE: OTIS), the world’s leading elevator and escalator company, reported its second-quarter 2025 earnings. While facing headwinds in new equipment sales, particularly in China, the company’s service segment demonstrated significant resilience, driving overall performance.
• Service net sales climbed 6%, with organic sales growth reaching 4%. The Service operating profit margin expanded by 20 basis points.
• GAAP EPS saw a slight dip of 3%, while adjusted EPS decreased by 1%.
• The company’s maintenance portfolio grew by 4%. This reflects the company’s continued dominance in the high-margin and stable service business.
• Modernization orders surged by 22% in constant currency, boosting backlog by 19% (16% at constant currency). This signals robust demand for upgrades across its installed base.
• New Equipment orders experienced a slight decline of 1% at constant currency. However, excluding China, orders climbed 11%, revealing a more positive trend outside of the Chinese market.
First Half 2025 Highlights
• Service net sales increased by 4%, with organic sales also up 4%. The Service operating profit margin expanded 20 bps
• GAAP EPS decreased by 15%, while adjusted EPS increased by 2%.
• GAAP cash flow from operations reached $405 million, with adjusted free cash flow at $429 million.
• Otis continued to return value to shareholders through share repurchases of approximately $550 million.
“Otis delivered solid performance led by the strength of our Service segment that continues our steady growth trajectory, and contributed mid-single digit organic sales growth and both year over year and sequential operating profit margin expansion. Our industry leading maintenance portfolio grew 4% again this quarter,” said Chair, CEO & President Judy Marks. “Modernization acceleration continues with orders growing greater than 20% and backlog growing mid-teens. Along with strong performance in our repair business this quarter and the continued execution of our Service driven strategy, we have the confidence to reconfirm our 2025 EPS outlook.”
Otis Navigates Regional Disparities, Focuses on Service-Driven Strategy
Otis’s second-quarter net sales of $3.6 billion reflected a 2% drop in organic growth year-over-year. This decline was primarily attributed to sluggish New Equipment sales in China and the Americas. However, strong performance in the Service segment, which saw growth across all lines of business, acted as a significant counterbalance.
The company’s strategic emphasis on its Service segment, characterized by recurring revenue streams and higher margins, is paying off. The modernization and repair businesses are experiencing accelerated momentum, driven by the increasing demand for upgrades and maintenance across the company’s extensive installed base.
China Challenges, Modernization Boost
While globally, New Equipment orders were down 1% at constant currency, excluding China, backlog increased 10% at actual currency and 8% at constant currency, which provides encouraging evidence of growth. Modernization, on the other hand, is proving to be a bright spot. Modernization orders grew by more than 20%, signaling strong demand for upgrading aging infrastructure. This trend aligns with broader urbanization and sustainability initiatives, where modern, energy-efficient elevators and escalators are in high demand.
Key Figures
|
(dollars in millions, except per share amounts) |
Quarter Ended June 30, |
Six Months Ended June 30, |
|||||||||||||
|
2025 |
2024 |
Y/Y |
Y/Y |
2025 |
2024 |
Y/Y |
Y/Y |
||||||||
|
Net sales |
$ 3,595 |
$ 3,601 |
— % |
(1) % |
$ 6,945 |
$ 7,038 |
(1) % |
— % |
|||||||
|
Organic sales growth |
(2) % |
(1) % |
|||||||||||||
|
|
|||||||||||||||
|
GAAP |
|||||||||||||||
|
Operating profit |
$ 547 |
$ 570 |
$ (23) |
$ 958 |
$ 1,114 |
$ (156) |
|||||||||
|
Operating profit margin |
15.2 % |
15.8 % |
(60) bps |
13.8 % |
15.8 % |
(200) bps |
|||||||||
|
Net income |
$ 393 |
$ 415 |
(5) % |
$ 636 |
$ 768 |
(17) % |
|||||||||
|
Earnings per share |
$ 0.99 |
$ 1.02 |
(3) % |
$ 1.60 |
$ 1.89 |
(15) % |
|||||||||
|
|
|||||||||||||||
|
Adjusted non-GAAP comparison |
|||||||||||||||
|
Operating profit |
$ 612 |
$ 613 |
$ (1) |
$ (14) |
$ 1,172 |
$ 1,174 |
$ (2) |
$ 1 |
|||||||
|
Operating profit margin |
17.0 % |
17.0 % |
0 bps |
16.9 % |
16.7 % |
20 bps |
|||||||||
|
Net income |
$ 416 |
$ 428 |
(3) % |
$ 784 |
$ 789 |
(1) % |
|||||||||
|
Earnings per share |
$ 1.05 |
$ 1.06 |
(1) % |
$ 1.97 |
$ 1.94 |
2 % |
|||||||||
Second quarter net sales of $3.6 billion were flat versus the prior year, driven primarily by a decrease in New Equipment sales in China and the Americas, offset by Service sales with growth in all lines of business.
Second quarter GAAP operating profit of $547 million decreased $23 million driven by non-recurring items. Adjusted operating profit of $612 million decreased $1 million at actual currency and decreased $14 million at constant currency, driven by a decline in New Equipment mostly offset by growth in Service. GAAP operating profit margin contracted 60 basis points to 15.2% and adjusted operating profit margin of 17.0% was flat versus the prior year driven by favorable segment mix offset by segment performance.
GAAP EPS of $0.99 decreased 3% compared to the prior year driven by non-recurring items. Adjusted EPS of $1.05 decreased 1% driven by operational performance, taxes and interest expense partially offset by favorable foreign exchange rates, a lower share count, and favorable minority interest.
Service
|
Quarter Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
|
(dollars in millions) |
2025 |
|||||||||||||||
