Otis Worldwide to Report Q1 Earnings: What to Expect From the Stock?

Otis Worldwide Corporation OTIS is scheduled to report first-quarter 2025 results on April 23, before the opening bell.

In the last reported quarter, the company’s adjusted earnings missed the Zacks Consensus Estimate by 2.1%, while net sales beat the same by 0.7%. On a year-over-year basis, earnings and revenues increased 6.9% and 1.5%, respectively.

OTIS’ earnings surpassed the consensus mark in two of the trailing four quarters and missed on the remaining two occasions, with an average surprise of 0.2%. (Find the latest earnings estimates and surprises on Zacks Earnings Calendar.)

Trend in Otis Worldwide’s Estimate Revision

For the quarter to be reported, the Zacks Consensus Estimate for earnings per share (EPS) has been stable at 91 cents in the past 60 days. The estimated figure indicates a rise of 3.4% from the year-ago adjusted EPS of 88 cents.

Otis Worldwide Corporation Price and EPS Surprise

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

The consensus mark for net sales is pegged at $3.4 billion, indicating a 0.9% decrease from the year-ago figure of $3.44 billion.

Key Factors to Note for OTIS’ Q1 Earnings

Revenues

This leading elevator and escalator manufacturing, installation and service company’s first-quarter top line is likely to have decreased year over year due to weak performance in the New Equipment segment. The segment is expected to have faced challenges in China and, to some extent, in the EMEA region. Our model predicts New Equipment revenues to decline 9.9% year over year to $1.15 billion.

Nonetheless, the company’s Service segment is likely to have aided its performance to some extent, driven by solid modernization order growth globally. The segment is likely to have benefited from higher volume, favorable pricing and improved productivity. Our model expects revenues within the Service segment to rise 5.8% to $2.21 billion compared with the prior-year quarter.

Also, the company's focus on acquisitions, product innovations and the integration of new technologies driven by ongoing research and development efforts is likely to have aided its performance.

Margins

Meanwhile, lower volume and unfavorable mix in the New Equipment segment, accompanied by wage inflation across the Service segment, are expected to have been headwinds to OTIS’ bottom line. The company is expected to report flat earnings per share in the first quarter.

However, favorable pricing, productivity and commodity tailwinds, along with leverage from the increased top line because of improved contributions from the Service segment, are likely to have eliminated the negative impacts of the headwinds during the quarter.

Moreover, simplified operating structure, optimized organizational layers and lower digital technology costs are expected to have resulted in a decline in the selling, general and administrative (SG&A) expenses in the first quarter. We expect OTIS’ SG&A expenses to decline 3.5% year over year to $445.9 million. Strong operational performance is likely to have helped offset foreign exchange and interest headwinds.

Our model expects the adjusted operating margin in the New Equipment segment to decrease 40 basis points (bps) year over year to 5.1%, while the same for the Service segment is anticipated to increase 30 bps to 24.5%.

What the Zacks Model Unveils for OTIS

Our proven model does not conclusively predict an earnings beat for Otis Worldwide this time around. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here, as elaborated below.

OTIS’ Earnings ESP: OTIS has an Earnings ESP of 0.00% at present. You can uncover the best stocks before they’re reported with our Earnings ESP Filter.

OTIS’ Zacks Rank: Currently, the company carries a Zacks Rank #4 (Sell).

Stocks With the Favorable Combination

Some companies in the Zacks Construction sector, which according to our model, have the right combination of elements to beat on earnings in their respective quarters to be reported are MasTec, Inc. MTZ, Meritage Homes Corporation MTH and Martin Marietta Materials, Inc. MLM.

MasTec has an Earnings ESP of +0.85% and a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

The company’s earnings beat estimates in each of the last four quarters, the average surprise being 31.6%. MasTec’s earnings for the quarter to be reported are expected to increase 361.5%.

Meritage Homes currently has an Earnings ESP of +0.62% and a Zacks Rank of 3.

The company’s earnings beat estimates in each of the last four quarters, the average surprise being 46.1%. Meritage Homes’ earnings for the quarter to be reported are expected to decrease 32.4%.

Martin Marietta currently has an Earnings ESP of +4.48% and a Zacks Rank of 3.

Martin Marietta’s earnings beat estimates in two of the last four quarters and missed twice, the average negative surprise being 1.7%. The company’s earnings for the quarter to be reported are expected to decrease 4.7%.

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This article originally published on Zacks Investment Research (zacks.com).

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