Otis Worldwide (US:OTIS)2024-01-31 15:46Financial Data and Key Metrics Changes - The company achieved full year organic sales growth of 5.6%, driven by service growth of 7.7% [4] - Adjusted EPS grew 16% or $0.12 in the fourth quarter [17] - Adjusted free cash flow for the year was approximately $1.5 billion, with $573 million in the fourth quarter [8][46] Business Line Data and Key Metrics Changes - New equipment sales for the full year were $5.8 billion, with organic sales growth of 2.6% [20] - Service sales reached $8.4 billion with 7.7% organic growth, including maintenance and repair sales up 6.8% [42] - Modernization orders increased by 16.8% for the year, with a backlog up 15% [31][36] Market Data and Key Metrics Changes - New equipment orders were down 3.9% for the year, with mid-teens growth in Asia Pacific offset by declines in China and the Americas [9] - The Americas market was down low-teens, while EMEA saw high-single-digit declines [48] - The Asia market was down mid-single-digits, primarily due to a decline in China [48] Company Strategy and Development Direction - The company is focused on executing its growing new equipment and modernization backlogs, with a commitment to ESG goals [5] - The strategy includes standardizing products and optimizing supply chains to drive sales growth above 7% [27] - The company aims to repurchase approximately $800 million in shares in 2024 while pursuing bolt-on M&A opportunities [25] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the service-driven business model despite macroeconomic uncertainties [30] - The global new equipment market is expected to decline low to mid-single-digits in 2024, with service expected to drive growth [24] - Adjusted EPS is projected to be in the range of $3.80 to $3.90, reflecting a growth of 7% to 10% [49] Other Important Information - The company launched the Gen3 Mod and a package of upgrades to support modernization in the Americas [10] - The company has 900,000 connected units, with 500,000 using the Otis ONE IoT solution [12] - The company is on track to achieve $150 million in run rate savings by mid-2025 through Project Uplift initiatives [52] Q&A Session Summary Question: What is the outlook for modernization margins? - Management indicated that modernization margins are expected to surpass new equipment margins as they standardize products and optimize supply chains [77][92] Question: How is the competitive environment in China affecting pricing? - Management noted that while the market remains weak, they are managing volume and share versus profitability, maintaining a focus on service growth [96][104] Question: What is the expected performance in North America and EMEA? - Management highlighted that the new equipment market in North America finished at its lowest since the GFC, but they still gained share and increased pricing [100]