Otis Earnings: Softened Modernization Orders Come as a Surprise, but Long-Term Outlook Still Bright

Wide-moat Otis delivered a resilient set of third-quarter results that featured ongoing strength in the service business, where organic sales advanced 7.7%, supported by a healthy order backlog for elevator modernizations and solid growth of the maintenance portfolio. New-equipment sales fell 8.2% organically in the quarter, driven by the ongoing fallout of China’s property market—in China, new-equipment sales dropped by more than 20% in the quarter. The group EBIT margin held steady at 16.9% in the quarter as a positive sales mix shift toward the high-profit-margin service business offset the weakening of new-equipment margins, which were affected by both lower volumes and unfavorable mix.