Otis: The Better Elevator Stock, As Confirmed By Strong H1 Results
(Preview) Company Update (OTIS US) (Buy)
Summary
Otis stock has fallen by 20%+ in the past year after elevator companies have been hit by the slowdown in China and higher input costs.
Otis has lower exposure to China than main rival Kone and is still expecting to grow its EPS by 4-7% this year despite FX headwinds.
Otis' all-important Maintenance revenues are growing at mid single digits and accelerating, and it is gaining share in New Equipment.
We believe Otis will achieve an EPS CAGR of just under 10% in 2021-25, while the stock is too cheap at 23x guided 2022 EPS.
With shares at $72.72, we expect an exit price of $127 and a total return of 81% (19.9% annualized) by 2025 year-end. Buy.
Introduction
We review our Otis Worldwide Corporation investment case after shares have fallen by more than 20% since peaking almost exactly a year ago.
We initiated our Buy rating on Otis in July 2020. While shares have gained 32% (including dividends) in the two years since, more than two thirds of this gain occurred in 2020, and their recent wea…