Otis Earnings: New Equipment Orders Defied Weak Construction Environment in Late 2023

Otis Worldwide’s fourth-quarter 2023 performance largely tracked our full-year expectations, with the wide-moat stock delivering full-year EBIT of $2.27 billion and EPS of $3.54, representing respective 6.7% and 11.7% year-on-year increases. Operating income growth was supported by organic sales growth of 5.6%, resulting from the ongoing robust growth of Otis’ service business—the group’s most important segment accounted for approximately 70% of group EBIT. The group full-year 2023 EBIT margin widened by 30 basis points to 16.0%, spurred largely by solid EBIT margin progression of the service segment with increased service volumes, improved productivity, and price increases all contributing. Elsewhere, Otis’ smaller new equipment segment treaded water in 2023, with its EBIT contribution of $381 unchanged year on year amid subdued new equipment demand.