Yahoo Finance Otis Worldwide Corp (OTIS) Q1 2024 Earnings Call Transcript Highlights: Robust Growth Amidst ...
Net Sales: $3.4 billion in Q1, organic sales up 3.8%
Adjusted Operating Profit: Up $50 million, excluding $7 million foreign exchange headwind
Adjusted EPS: Grew 10% or $0.08 in the quarter
Service Organic Sales Growth: 6.5%, marking the 12th consecutive quarter of mid-single-digit or greater growth
New Equipment Orders: Down 10% in Q1, backlog roughly flat vs. prior year
Share Repurchases: $300 million in the quarter
Quarterly Dividend: Increased by 14.7%
Adjusted Free Cash Flow: $155 million in Q1
2024 Financial Outlook: Net sales expected between $14.5 billion to $14.8 billion, adjusted EPS $3.83 to $3.90
2024 Adjusted Free Cash Flow: Anticipated at approximately $1.6 billion
Release Date: April 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Q & A Highlights
Q: Could you discuss the margin dynamics in the Modernization (Mod) segment, particularly in terms of pricing and production standardization? A: Judith F. Marks, CEO of Otis, highlighted that Mod sales were robust across all regions, with significant growth in Asia Pacific and the Americas. She noted that Mod margins have now surpassed those of New Equipment, marking a significant milestone. Anurag Maheshwari, CFO, added that productivity improvements and standardization efforts are driving these margin expansions.
Q: How do you view the global New Equipment market, especially considering the flat year-on-year backlog at constant currency and the downward trend in TTM orders? A: Anurag Maheshwari explained that while the New Equipment market saw a 10% decline in Q1 and is expected to continue declining in Q2, the comparison will improve in the second half of the year. He suggested that the New Equipment backlog could end the year flat to slightly down, depending on market performance.
Q: What are your expectations for Service margins given their strong performance in Q1? A: Judith F. Marks stated that the Service segment continues to perform well, driven by portfolio growth and pricing improvements. She mentioned that while it's still early in the year, the company is comfortable with a forecast of a 50 basis point increase in Service margins, supported by productivity and repair backlog management.
Q: Can you provide more details on the pricing environment and market conditions in China for both New Equipment and Service? A: Judith F. Marks described the pricing environment in China as highly competitive, particularly for New Equipment, where Otis is not achieving price increases. She noted that the market remains weak, with a significant decline in units. However, for Service, the focus is on productivity and leveraging technology like Otis ONE to improve margins.
Q: How does the Modernization backlog growth translate into sales growth, and what are the expectations for this segment? A: Anurag Maheshwari indicated that while the Mod backlog grew by 15%, sales growth projections have been adjusted to 8-9% due to conversion times. He expects sales growth to potentially reach double digits in the coming quarters as the company continues to improve product standardization and installation efficiency.
Q: What is the outlook for the Indian market, and how significant is it within the Asia-Pacific region? A: Judith F. Marks emphasized India's importance as the highest growth market globally, with strong performance across all verticals. She highlighted the strategic investments in local manufacturing and the potential for continued double-digit growth, driven by infrastructure development and urbanization.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
