OTIS Financial Analysis

Analysis Date: 1/30/2025

Business Model

Otis generates revenue through two main segments: New Equipment and Service (maintenance, repair and modernization)

Revenue Sources

• New Equipment (38% of FY2024 revenue) - Sales of new elevator and escalator installations
• Service (62% of FY2024 revenue) - Maintenance, repair and modernization of existing installations

Revenue Distribution by Channel

• Direct sales and through agents/distributors

Income Statement Analysis

• Organic sales grew 1.9% driven by 7.8% Service growth
• Operating profit margin maintained at 14.4% despite lower New Equipment volumes
• Adjusted EPS grew 6.9% to $0.93 on solid operational performance

Balance Sheet Analysis

• Strong cash position of $2.3B, up 80.5% year-over-year
• Total assets increased 11.9% to $11.3B

Cash Flow Analysis

• Strong Q4 operating cash flow of $690M, up 15.6% year-over-year
• Adjusted free cash flow of $682M in Q4, up 19% year-over-year

Capital Allocation

Balanced capital allocation with $200M in share repurchases in Q4 ($1.0B full year), while maintaining strong investment in R&D and strategic growth initiatives. Implementing UpLift program targeting $200M run-rate savings by H2 2025.

Management Commentary

Strong Q4 results with high single digit adjusted EPS growth

Service portfolio grew 4.2% to approximately 2.4M units

New Equipment challenges in China market

Overall Sentiment: Cautiously optimistic, focused on service growth and operational efficiency while managing through New Equipment market challenges

Recommendation

Rating: Buy

Reason for Rating: Strong service business momentum and operational improvements offset near-term New Equipment headwinds

Disclaimer: This analysis is based on company filings and public information. It is for informational purposes only and not financial advice. Past performance does not guarantee future results.

Generated on: 1/30/2025, 7:44:42 AM