Otis Worldwide Corp. raised its 2020 profit outlook as 3Q adjusted earnings per share jumped 25.5% to $0.69 year-over-year, surpassing analysts’ expectations of $0.56. The elevator and escalator installation company’s bottom-line results mainly benefited from cost-containment measures, improved productivity and favourable foreign currency exchange rates.
Otis (OTIS) 3Q revenues declined 1.4% on a year-over-year basis to $3.27 billion but beat Street estimates of $3.21 billion. The company reported a slight improvement in new equipment orders and a 5% year-over-year growth in new equipment backlog.
The company’s CEO Judy Marks said, “Otis had another strong quarter as we continued to grow share, build backlog, expand adjusted margin and generate robust cash flow. These outcomes again demonstrate the resiliency of our business, the strength of our strategy and the dedication of our colleagues around the world to provide essential services to our customers while introducing innovative solutions to grow our business.” (See OTIS stock analysis on TipRanks).
Buoyed by better-than-expected quarterly performance, Otis raised its full-year 2020 earnings outlook. The company now anticipates 2020 adjusted EPS of approximately $2.42, up from the previous forecast of $2.20-$2.30. Revenue is expected to decline 3%-4% compared with the earlier projection for a drop of 4.5%-6.5%.
Following its earnings release, Cowen & Co. analyst Cai Rumohr raised the stock’s price target of $75 (18.7% upside potential) from $70 and reiterated a Buy rating, saying that “Q3’s beat & raise supports Otis’s management change and share gain growth story.” Rumohr also noted that the upbeat 2020 earnings outlook “reflects seasonal slowing (Golden Week in China), growth investments, and higher corporate costs.”
Currently, the Street is cautiously optimistic on the stock. The Moderate Buy analyst consensus is based on 3 Buys, 2 Holds and 1 Sell. The average price target of $66.17 implies upside potential of about 4.7% to current levels. Shares are up nearly 41% since the stock started trading on NYSE on March 19.