Otis : Strong Elevation After Q3 Results Should Continue
(Preview) Company Update (OTIS US) (Buy)
Summary
Otis shares have gained 22% since Q3 results but remain 7% lower than a year ago and are at 25.8x EPS and a 1.5% Dividend Yield.
Our investment case is broadly on track. Adjusted EPS is expected to grow 3-5% in dollars in 2022, despite macro headwinds.
Group EBIT margin is expected to expand 30 bps, and Service revenues are expected to grow 6.0-6.5% organically this year.
New Equipment revenues will decline in 2022 because of China but show stable revenues and growing orders in the rest of the world.
With shares at $78.82, we expect an exit price of $124 and a total return of 63% (17.9% annualized) by 2025 year-end. Buy.
Introduction
We review our Otis Worldwide Corporation investment case three months after our last review on September 2.
While Otis' share price has risen sharply since troughing in late September, including a 22% gain since Q3 results were released on October 21, they remain 7% lower than a year ago:
Otis Share Price (Last 1 Year)
We …