Otis Worldwide (OTIS)2024-10-30 17:03Financial Data and Key Metrics Changes - Otis reported net sales of 0.01 compared to a tough prior year comparison of approximately 19% EPS growth [10][11] - Year-to-date, adjusted EPS growth reached 8.2%, and the company generated 900 million year-to-date [5][14] Business Line Data and Key Metrics Changes - The Service segment delivered high single-digit growth of 7.7% in Q3, contributing to a year-to-date service organic sales growth of 6.4% [4][11] - New Equipment organic sales were down 8.2%, primarily due to a greater than 20% decline in China, while excluding China, New Equipment sales increased low single digits [11][12] - Modernization organic sales accelerated by about 14% in Q3, bringing year-to-date organic sales to approximately 10% [11][12] Market Data and Key Metrics Changes - New Equipment orders decreased by 3% in Q3, with a significant decline of over 20% in China, while orders in the Americas grew more than 20% [6][10] - Orders in APAC delivered high single-digit growth, driven by strength in Japan and Southeast Asia, while EMEA experienced high single-digit declines due to weakness in Western and Northern Europe [6][10] Company Strategy and Development Direction - The company is focusing on a service-driven business model, with a commitment to expanding its modernization backlog and improving operational efficiency through the Uplift program [20][29] - Otis anticipates a resilient Service market, expecting global install base growth in mid-single digits, while New Equipment markets are expected to face challenges, particularly in China [15][16] Management's Comments on Operating Environment and Future Outlook - Management noted that the New Equipment market in China remains weak, with expectations of a 15% decline in 2024, while the Americas are showing signs of improvement [15][32] - The company expects adjusted EPS to reach around 1 billion to shareholders through share repurchases and dividends in 2024 [19] Q&A Session All Questions and Answers Question: Can you elaborate on the fundamentals in China and pricing pressures? - Management acknowledged that the New Equipment market in China remains weak, with a significant revenue decline, but emphasized that pricing remains competitive rather than irrational [32][33] Question: What is the outlook for Service margins? - Service margins are performing in line with expectations, with a slight increase due to good volume flow and pricing improvements [36] Question: How do mod margins in China compare to the rest of the world? - Management indicated that mod margins in China are attractive and expected to grow rapidly, with early orders showing promise [40][41] Question: What is the long-term outlook for the New Equipment market in China? - Management suggested that while there is potential for the market to decline, they expect sequential growth improvement in 2025 compared to 2024 [44][51] Question: Can you provide insights on the Americas and EMEA growth? - Management reported strong performance in the Americas, with a significant increase in orders and a solid backlog, while EMEA is performing well despite market challenges [59][60]