Otis (NYSE:OTIS) Reports Sales Below Analyst Estimates In Q2 Earnings, Stock Drops

Elevator manufacturer Otis (NYSE:OTIS) missed Wall Street’s revenue expectations in Q2 CY2025, with sales flat year on year at $3.60 billion. The company’s full-year revenue guidance of $14.55 billion at the midpoint came in 1.1% below analysts’ estimates. Its non-GAAP profit of $1.05 per share was 2.2% above analysts’ consensus estimates.

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Company Overview

Credited with inventing the first hydraulic passenger elevator, Otis Worldwide (NYSE:OTIS) is an elevator and escalator manufacturing, installation and service company.

Revenue Growth

Examining a company’s long-term performance can provide clues about its quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Regrettably, Otis’s sales grew at a sluggish 2.3% compounded annual growth rate over the last five years. This was below our standards and is a rough starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Otis’s recent performance shows its demand has slowed as its annualized revenue growth of 1.2% over the last two years was below its five-year trend.

Otis also reports organic revenue, which strips out one-time events like acquisitions and currency fluctuations that don’t accurately reflect its fundamentals. Over the last two years, Otis’s organic revenue averaged 1.6% year-on-year growth. Because this number aligns with its normal revenue growth, we can see the company’s core operations (not acquisitions and divestitures) drove most of its results.

This quarter, Otis missed Wall Street’s estimates and reported a rather uninspiring 0.2% year-on-year revenue decline, generating $3.60 billion of revenue.

Looking ahead, sell-side analysts expect revenue to grow 5.4% over the next 12 months. While this projection suggests its newer products and services will catalyze better top-line performance, it is still below average for the sector.

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Operating Margin

Operating margin is one of the best measures of profitability because it tells us how much money a company takes home after procuring and manufacturing its products, marketing and selling those products, and most importantly, keeping them relevant through research and development.

Otis has been an efficient company over the last five years. It was one of the more profitable businesses in the industrials sector, boasting an average operating margin of 14.6%. This result was particularly impressive because of its low gross margin, which is mostly a factor of what it sells and takes huge shifts to move meaningfully. Companies have more control over their operating margins, and it’s a show of well-managed operations if they’re high when gross margins are low.

Looking at the trend in its profitability, Otis’s operating margin decreased by 1.2 percentage points over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.

This quarter, Otis generated an operating margin profit margin of 15.2%, in line with the same quarter last year. This indicates the company’s cost structure has recently been stable.

Earnings Per Share

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Otis’s EPS grew at a spectacular 15.9% compounded annual growth rate over the last five years, higher than its 2.3% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

We can take a deeper look into Otis’s earnings quality to better understand the drivers of its performance. A five-year view shows that Otis has repurchased its stock, shrinking its share count by 8.8%. This tells us its EPS outperformed its revenue not because of increased operational efficiency but financial engineering, as buybacks boost per share earnings.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For Otis, its two-year annual EPS growth of 8.6% was lower than its five-year trend. We hope its growth can accelerate in the future.

In Q2, Otis reported EPS at $1.05, down from $1.06 in the same quarter last year. Despite falling year on year, this print beat analysts’ estimates by 2.2%. Over the next 12 months, Wall Street expects Otis’s full-year EPS of $3.86 to grow 12.1%.

Key Takeaways from Otis’s Q2 Results

We struggled to find many positives in these results. Its revenue missed and its EBITDA fell short of Wall Street’s estimates. The company also lowered its full-year revenue guidance, further evidence of performance below even internal expectations. Overall, this was a softer quarter. The stock traded down 6.9% to $94 immediately after reporting.

Otis’s earnings report left more to be desired. Let’s look forward to see if this quarter has created an opportunity to buy the stock. We think that the latest quarter is only one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.