Otis: Solid Q4, More High-Single-Digit EPS Growth Guided In 2023
(Preview) Company Update (OTIS US) (Buy)
Summary
Otis's Adjusted EPS grew high-single-digits operationally in both Q4 and full-year 2022. Including currency, it still grew 7.5% in 2022.
The key Maintenance business grew units by 4.1% and like-for-like pricing by 3% in 2022. Adjusted EBIT margin expanded 30 bps.
Management expects Adjusted EPS to grow by another 6-10% in 2023, even with a contraction in industry New Equipment units.
Shares are at 25.0x the mid-point of 2023 guided EPS and a 1.4% Dividend Yield. Buybacks can shrink the share count by 2% in 2023.
With shares at $84.73, we expect an exit price of $116 and a total return of 42% (13.3% annualized) by 2025 year-end. Buy
Introduction
We review our investment case on Otis Worldwide Corporation after the company released Q4 2022 results last Wednesday (February 1). The price of OTIS stock has remained largely unchanged since.
We initiated our Buy rating on Otis in July 2020. Shares have gained 54% (including dividends) in less than 3 years, though the share price is currently…