Otis Q3 sales rise 6% as Service growth offsets New Equipment weakness

Otis Worldwide Corporation (OTIS) said in a regulatory filing on Oct. 28 that third-quarter net sales rose 6% to $3.91 billion, in line with the $3.95 billion consensus estimate compiled by Finnhub.

Adjusted earnings per share were flat at $1.05, also in line with the $1.05 consensus estimate. Growth in the company's Service business offset a decline in New Equipment profit.

The company makes, installs, services and modernizes elevators and escalators, with about 2.5 million customer units worldwide and 72,000 people. It is headquartered in Connecticut.

Here's how the company did:

• Net sales: $3.91 billion vs. $3.69 billion a year earlier, in line with the $3.95 billion consensus estimate compiled by Finnhub
• Adjusted EPS: $1.05 vs. $1.05 a year earlier, in line with the $1.05 consensus estimate compiled by Finnhub
• GAAP EPS: $1.08 vs. 95 cents a year earlier
• Adjusted operating profit: $626 million vs. $632 million a year earlier
• Operating cash flow: $337 million vs. $374 million a year earlier

Net sales rose 6% from a year earlier, and organic sales, which exclude currency effects and acquisitions and divestitures, also rose 6%.

GAAP operating profit rose $34 million to $620 million. The company said the increase was driven mainly by the absence of UpLift transformation costs, separation-related adjustments and other non-recurring items in the prior year.

Adjusted operating profit, which excludes restructuring costs and other items, fell $6 million to $626 million, or $3 million at constant currency. The adjusted operating profit margin was 16.0%, down 110 basis points from a year earlier.

Adjusted EPS, a non-GAAP measure, was flat. Lower share count and minority interest benefits were offset by a higher tax rate, higher interest expense and unfavorable currency rates.

Service segment results

Service net sales rose 8% to $2.62 billion from $2.43 billion a year earlier. Organic sales rose 7%, with organic maintenance and repair sales up 4% and organic modernization sales up 20%.

Service segment operating profit rose $12 million to $633 million. The company said higher volume and favorable pricing were partly offset by higher labor costs, including the impact of its strategic initiatives, and unfavorable mix.

The segment margin was 24.2%, down 130 basis points from a year earlier but up 100 basis points sequentially.

New Equipment results

New Equipment net sales rose 3% to $1.30 billion from $1.26 billion, with organic sales also up 3%. Growth in the Americas in the low teens, and in EMEA and Asia Pacific, was partly offset by a decline of more than 20% in China.

Segment operating profit fell $17 million to $42 million, and the margin contracted 150 basis points to 3.2%. The company attributed the decline primarily to unfavorable price and mix, partly offset by productivity and higher volume.

New Equipment orders were up 1% at constant currency, and New Equipment backlog rose 4%. Modernization backlog rose 20%.

Cash flow and capital returns

Operating cash flow was $337 million, down from $374 million a year earlier, and adjusted free cash flow was $272 million, compared with $337 million. The company said higher net income was offset by changes in working capital.

For the first nine months, net sales were $11.34 billion, up 7%, and GAAP operating profit rose $190 million. The company said it repurchased approximately $800 million of shares and paid approximately $500 million in dividends, returning about $1.3 billion to shareholders.

2026 guidance

Otis kept its full-year outlook for net sales of $15.1 billion to $15.3 billion, organic sales growth of low to mid-single digits, adjusted operating profit of approximately $2.4 billion and adjusted EPS of $4.01 to $4.05.

The company's adjusted free cash flow outlook is about $1.5 billion, against a prior range of $1.50 billion to $1.55 billion.

Chair, CEO & President Judy Marks said: "Otis delivered another quarter of strong top-line growth, supported by sustained performance across all Service lines and growth in New Equipment." Marks also said the company is working to "build a stronger foundation for sustained growth."

Adjusted measures are non-GAAP figures. The company said it does not provide reconciliations of its forward-looking non-GAAP outlook to GAAP measures because of the variability and low visibility of the items it would exclude.