Christine PooleOtis Worldwide Corp.OTISPARTIAL BUYMar 15, 2022

The elevator business enjoys an oligopoly and a good service business, which boasts higher margins than on new elevators. But growth in China had slowed the past 3 years. However, there's growth in new lifts in the Americas and India, while aging elevators need more replacing especially in Europe. Shares have pulled back, because new equipment has been weak. But services are improving as well as new equipment. Otis is focusing on having new customers attach services to new orders.

Margins are pretty low (5-6%) in the purchasing segment, but much higher (24-25%) in the long-term service/maintenance division. Otis and its top 3 competitors have ~60% market share. New equipment side has been weak, as China has been very weak; but focused on improving uptake of service contracts, and that's paying off and increasing. 

Installed base is aging (40% of elevators are over 15 years old), needing to be modernized or replaced. Yield is 1.85%.

It just reported a slight miss and a light forecast, but shares fell a little because of its steady track record.

Has undeperformed the market because new sales in China have been weak. However, Otis is in an oligopoly with a leading share of 19%. Also, service contracts are very profitable with 65% of global customers opting into a service contract when they buy their elevator, and 50% in China, but that number is climbing. She expects earnings growth around 9%. Also, elevators are aging and need repair/replacement.

Part of a global oligopoly, with ~20% share of the global market. Very large installed base, and margin for servicing elevators is about 3x that of selling the elevators. Recent issues from demand in China, should rebound medium term. Still, it's in a great position worldwide. 24x PE, attractive. Yield is 1.5%.

They reported a small top and bottom line miss, and cut their full-year forecast due to weakness in China. Shares ran up before the quarter, and sold off 3% after so is only -6.5%  from last month's all-time highs. A winner as central banks cut rates around the world.

They reported a mixed quarter today: light revenues, earnings beat a little and raised their full-year forecast. But shares slipped maybe on cautionary comments on China and lowered full-year equipment sales outlook. He's bullish. Now is a buying opportunity.

Today they reported a solid quarter and in-line guidance. Shares rallied at first, but closed lower with the rest of the market after Jay Powell's comments. That sell-off was a mistake.

Look at revenues and find out who's building office towers. Look at recurring revenues, because elevators often break down and need constant service. Kone is more European while Otis is global. If the USD falls, Otis will improve better. It comes down to the USD.

#1 in new equipment, with 19% market share. Global, over 70% of operations outside NA. Service side is very high margin. Package deal of elevator + service contract is about 60%, increasing over time. Aging elevators. Long-term, attractive growth. Yield is 1.6%.

The worst sector is commercial real estate and yet Otis, which supplied these building elevators, is hitting 52-week highs. A lot of credit goes to the CEO.

Today, they reported a solid quarter: a modest top and bottom line beat, and strong and surprising organic growth. Shares have already rallied 32% from last fall's bottom, it popped another 2.8% today to make a new 52-week high. Wall Street remains bearish on non-residential construction, which benefits Otis.