Otis Worldwide Corp

Otis Worldwide Corporation has fallen 19% year to date after cutting its 2026 adjusted earnings per share guidance to $4.01-$4.05 from $4.20-$4.24 and lowering adjusted operating profit guidance to about $2.4 billion from about $2.5 billion. The stock now trades at 16.1 times forward 12-month earnings, a discount to its five-year median of 23.01 times and below the Zacks sub-industry multiple of 21.55 times. Adjusted free cash flow guidance was also reduced to $1.50-$1.55 billion from $1.60-$1.65 billion, while net sales guidance was maintained at $15.1-$15.3 billion, indicating weaker conversion of sales into profit and cash flow. Second-quarter adjusted operating margin contracted 180 basis points to 15.2%, with Service margin down 170 basis points to 23.2% and New Equipment margin down 220 basis points to 3.1%. The company repurchased roughly $800 million of shares in the first half and raised its dividend 5%, offering a 2.5% yield, providing partial downside support. Otis currently carries a Zacks Rank #4 (Sell), reflecting ongoing estimate revisions and margin execution risk.

Otis Worldwide reported 6% organic sales growth in the second quarter, driven by a 9% increase in service organic sales and a 24% surge in modernization sales, while new equipment sales were nearly flat. Despite the top-line growth, adjusted operating margin fell to 15.2% and the company lowered its full-year adjusted operating profit and earnings per share outlook, citing labor, material, productivity, and investment costs. Otis is investing $50 million in service quality and retention during 2026, with $30 million spent in the first half, and still expects adjusted free cash flow of $1.5 billion to $1.55 billion for the year. The company repurchased approximately $800 million of shares in the first half and raised its dividend by 5%, returning more than $1.1 billion to shareholders.

Otis Worldwide Corporation is scheduled to report second-quarter 2026 results on July 22 before the opening bell. The Zacks Consensus Estimate for earnings per share has edged down to $1.00 from $1.01 over the past 30 days, implying a 4.8 percent decline from the year-ago adjusted EPS of $1.05. Net sales are pegged at $3.72 billion, indicating 3.5 percent growth from $3.6 billion a year earlier. The Service segment, which contributed 67.8 percent of first-quarter 2026 net sales, is expected to drive top-line gains with a projected 7.5 percent increase to $2.49 billion, while the New Equipment segment, which accounted for 32.2 percent of first-quarter sales, is forecast to decline 2.5 percent to $1.24 billion amid softness in China and Asia Pacific. Adjusted operating margins are seen contracting 100 basis points to 23.9 percent in Service and 180 basis points to 3.5 percent in New Equipment, and selling, general and administrative expenses are expected to rise 4.3 percent to $520.6 million. The company carries an Earnings ESP of negative 0.57 percent and a Zacks Rank of 4, suggesting a lower probability of an earnings beat.

Otis Worldwide Corporation is expected to report fiscal second-quarter 2026 earnings of $1.01 per share on a diluted basis, down 3.8% from $1.05 per share in the year-ago quarter. The company beat or matched consensus estimates in three of the last four quarters while missing on another occasion. For the full year, analysts expect earnings per share of $4.20, up 3.7% from $4.05 in fiscal 2025, with earnings per share expected to rise 10.2% year over year to $4.63 in fiscal 2027. Otis shares have underperformed the S&P 500 Index's 19.9% gains over the past 52 weeks, down 25.3% during this period. Analysts' consensus rating on the stock is Moderate Buy, with an average price target of $91.61, indicating a potential upside of 25.6% from current levels.