Otis Worldwide Reports Strong Q2 2024 Earnings Despite Challenges in New Equipment Orders

Otis Worldwide held its Q2 2024 earnings call on July 24, where company leaders discussed the challenges and successes faced by the business for the period ending June 30, 2024. Despite economic difficulties in regions like China, the performance of the service segment was particularly strong, with organic sales growing by mid-single digits. Overall, Otis reported adjusted earnings per share (EPS) growth of 15%, marking the fourth consecutive quarter of substantial growth. The company also reported a solid adjusted profit margin expansion and generated $353 million in adjusted free cash flow.

During the call, leaders acknowledged that while new equipment orders were down 11%, there was notable growth in the service segment. This included a 17% increase in the modernization backlog. Leaders highlighted ongoing projects, such as significant contracts in India and the expansion of services at major airports. Overall, the company expressed a somewhat bullish outlook for the future, particularly in areas of maintenance and modernization amidst a challenging new equipment environment.

However, concerns over the decline in new equipment orders, particularly in China, were raised. The company revised its expectations for the new equipment market down to a forecasted 10-15% decline in China due to economic softness. Leaders emphasized their strategy to adapt by focusing more on service and modernization, which they believe will mitigate some of the impacts caused by decreased equipment sales. As 2024 unfolds, Otis remains committed to maintaining profit margins through effective cost management and productivity improvements, setting a cautious yet optimistic tone for the upcoming quarters.