Otis Worldwide Q2 Earnings Top, Sales Miss, 2025 Sales View Down

Core Insights - Otis Worldwide Corporation (OTIS) reported mixed results for Q2 2025, with adjusted earnings exceeding estimates while net sales fell short [1][4] - Year-over-year, both top line and bottom line experienced declines [1] Financial Performance - Adjusted earnings were $1.05 per share, surpassing the Zacks Consensus Estimate of $1.02 by 2.9%, but down 1% from $1.06 in the prior year [4] - Net sales totaled $3.6 billion, missing the consensus mark of $3.69 billion by 2.4% and showing a slight decline of 0.2% year-over-year [4] - Organic net sales decreased by 2% year-over-year, with currency headwinds impacting sales by 1% [4] Segment Analysis - The New Equipment segment saw net sales drop by 10% year-over-year to $1.28 billion, with organic sales declining 11% [7] - The Service segment reported a 6% increase in net sales to $2.32 billion, driven by a 4% rise in organic maintenance and repair sales and a 5% increase in organic modernization sales [6] - Modernization backlog at constant currency increased by 16% year-over-year [6] Operational Metrics - Adjusted operating margin remained flat at 17%, with reduced contributions from the New Equipment segment offset by growth in the Service segment [5] - Segment operating margin for Service expanded by 20 basis points to 24.9%, while New Equipment's margin contracted by 240 basis points to 5.3% [7][8] Guidance and Outlook - OTIS revised its 2025 guidance, now expecting net sales between $14.5 billion and $14.6 billion, indicating 1-2% year-over-year growth [13] - Organic sales growth is projected at approximately 1%, down from a previous expectation of 2-4% [13] - Adjusted free cash flow is now expected to be between $1.4 billion and $1.5 billion, reduced from an earlier estimate of approximately $1.6 billion [16] Financial Position - As of June 30, 2025, cash and cash equivalents stood at $688 million, down from $2.3 billion at the end of 2024 [11] - Long-term debt increased to $7.07 billion from $6.97 billion at the end of 2024 [11] - Net cash flows from operating activities were $405 million for the first half of 2025, down from $479 million a year ago [11]