Otis: Resilient In 2020, Recovery Expected In 2021

Company Update (OTIS US) (Buy)

Summary

• Otis shares are trading near their recent all-time high, but we believe they are still an attractive opportunity as a quality growth stock.

• Despite COVID, Otis's sales only fell 2.1% organically in 2020, and EBIT rose 2.8%; its tax rate was down 4 ppt and is to drop further.

• The order backlog was resilient, up 1% organically in 2020. Modernization orders and the number of Maintenance units both rose.

• Otis's 2021 outlook anticipates a broad-based demand recovery; with an FX tailwind, sales are to grow 4.5-6.5% and EBIT to grow 6.5-9.0%.

• With shares at $70.75, we expect an exit price of $106 and a total return of 57% (13.1% annualized) in just under 4 years. Buy.

Introduction

We review our investment case on Otis, 6 months since our last update in October, with Otis shares trading near their most recent all-time high. We originally initiated a Buy rating on Otis stock in July 2020, and since then shares have gained 26.3% (including dividends) in 9 months …

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