Analyst Note| Denise Molina, CFA |
Otis' full-year 2020 results and 2021 outlook are in line with our expectations, so we do not expect to make material changes to our forecasts or $60 fair value estimate. Our wide moat rating remains intact, but we view shares as pricey at current levels. Otis' 2020 3% revenue decline and 70-basis-point EBIT margin expansion are impressive compared with peer Kone's 1% revenue growth but only 30-basis-point increase. For the elevator companies we cover, top-line growth in 2020 was driven largely by pandemic-related changes in demand rather than company actions. However, cost control and margin expansion were more within their control. Several companies we cover, including Otis, came into the pandemic year with cost-saving plans already drawn up because of entirely separate circumstances. The pandemic helped accelerate those cost-cutting programs, and in the case of Otis enabled it to produce 70 basis points of margin expansion in a year with revenue declines.