Otis Worldwide Corporation OTIS reported dismal results in the third quarter of 2024, with adjusted earnings and net sales missing the Zacks Consensus Estimate. The company reported lower-than-expected earnings in the quarter after four consecutive quarters of earnings beat.

 The top and bottom lines increased on a year-over-year basis.

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The quarterly results reflect soft contributions from the company’s New Equipment segment due to tepid demand trends, mainly in China. The impact of lower volume and unfavorable mix in this segment hurt the quarter’s results. The downtrend was, however, partially offset by sales growth in Asia Pacific and the Americas, along with favorable price, productivity and commodity mix.

Also, notable contributions from the Service segment helped improve the results to some extent.

OTIS stock lost 6.3% in the pre-market trading session on Wednesday, after releasing the earnings result. The investors’ sentiment is likely to have been hurt by the company’s downward revision of its 2024 outlook across key metrics.

Inside OTIS’ Headlines

The company reported adjusted earnings of 96 cents per share, which missed the Zacks Consensus Estimate of 97 cents by 1%. The reported figure increased 1.1% from the year-ago quarter’s earnings per share (EPS) of 95 cents.

Net sales of $3.55 billion missed the consensus mark by 1.3% but grew marginally by 0.7% on a year-over-year basis. Organically, net sales increased 1.2% year over year. Currency headwinds impacted sales by 0.8%.

Otis Worldwide Corporation Price, Consensus and EPS Surprise

Otis Worldwide Corporation price-consensus-eps-surprise-chart | Otis Worldwide Corporation Quote

Adjusted operating margin remained flat year over year at 16.9%, attributable to favorable segment mix offset by New Equipment segment performance and headwinds in corporate costs. Our model predicted the adjusted operating margin to expand 50 basis points (bps) year over year to 17.4%.

Segment Details of OTIS

New Equipment: This segment’s net sales of $1.31 billion fell 8.8% from the prior-year period. Organic sales declined 8.2%, which was accompanied by a 0.7% headwind from foreign exchange. Our model predicted organic sales for the New Equipment segment to decline 2.8%.

New Equipment orders were down 3% at constant currency. Growth in the Americas and Asia Pacific was more than offset by flat sales trends in Europe, the Middle East and Africa (EMEA) and softness in China. The segment’s backlog at constant currency declined 3% year over year.

Segment operating margin was down 80 bps year over year to 6.4%.

Service: The net sales of this segment increased 7.2% year over year to $2.24 billion. A 7.7% rise in organic sales and a 0.8% benefit from foreign exchange aided the top line. Organic maintenance and repair sales increased 6.4% and organic modernization sales rose 13.7% from the year-ago quarter. Our model predicted organic sales for the segment to grow 6.8%.

Modernization backlog at constant currency increased 12% year over year.

Segment operating margin was flat year over year at 24.8%, due to higher volume, favorable pricing and productivity, partially offset by annual wage inflation.