Otis Drops 4.4% Despite Q3 Beat and Improved FY2021 Outlook


Otis Worldwide Corporation (OTIS) reported stronger-than-expected third-quarter results, topping both earnings and revenue estimates, driven by sales growth and margin expansion across all segments.

However, shares of the global elevator and escalator manufacturer fell 4.4% on October 25 to close at $81.86 after the company raised its FY2021 outlook slightly below Street expectations. (See Otis Worldwide stock charts on TipRanks)

Adjusted earnings of $0.77 per share grew 11.6% year-over-year and beat analysts’ expectations of $0.73 per share. The company reported earnings of $1.80 per share in the prior-year period.

Furthermore, net sales jumped 10.8% year-over-year to $3.6 billion and exceeded consensus estimates of $3.54 billion. The increase in revenues reflected a surge in organic sales, which increased 8.1%.

On top of this, adjusted operating profit margins improved 20 basis points to 15.6%, driven by margin expansion in both the New Equipment and Service segments.

Based on the strong Q3 results, management raised its financial guidance for FY2021. The company now forecasts adjusted earnings of $2.95 per share, while the consensus estimate is pegged at $2.96 per share. Net sales are forecast to be $14.3 billion, versus the consensus estimate of $14.23 billion. Further, the company expects organic sales growth of 8.5% to 9%.

CEO Judy Marks commented, “We continue to advance our strategy, progress on ESG initiatives and achieve strong results, despite the macro environment, reflecting the resiliency of the business and our ability to execute. This gives us the confidence to improve the 2021 outlook and positions us well to build on this momentum in 2022.”

Barclays analyst Julian Mitchell maintained a Hold rating on the stock and set a price target of $88 (7.5% upside potential).

Consensus among analysts is a Strong Buy based on 4 Buys, 2 Holds, and 1 Sell. The average Otis Worldwide price target of $92.14 implies 12.6% upside potential to current levels. Shares have gained 30% over the past year.

OTIS scores a “Perfect 10” on TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform market expectations.

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