Nick Housden

Nick Housden asked about the annual growth potential for the modernization business in the coming years, given the 30% backlog growth and industrialization efforts. He also inquired about the 2026 EPS outlook, seeking clarification on how to achieve 10%+ ambitions given the mid-to-high single-digit guidance.

Answer

Judy Marks, Chair, CEO, and President of Otis Worldwide Corporation, discussed the modernization market's 13% growth in 2025, driven by aging units and phased replacements, noting strong order growth across quarters and major multi-year projects. She expects steady growth in the teens or more, driven by specialized sales and operational productivity. She stated the 2026 EPS guidance is intentionally conservative. Christina Mendez, Executive Vice President and CFO of Otis Worldwide Corporation, elaborated that the 6% EPS growth midpoint includes a stronger operational component ($0.15) than 2025, driven by $200 million in service operating profit growth, a favorable FX tailwind ($0.08), and flat below-the-line items due to higher interest expense offset by $800 million in share repurchases and a 24.5% tax rate.

Nick Housden with RBC Capital Markets questioned Otis's annual growth potential for its modernization business over the next few years, given the 30% increase in modernization backlog and industrialization efforts. He also sought clarification on the 2026 EPS outlook, specifically why it's mid-to-high single digits, below previous 10%+ ambitions, and what factors could drive a return to higher growth.

Answer

Judy Marks, Chair, CEO, and President of Otis Worldwide Corporation, stated that the modernization market grew 13% in 2025 and expects continued growth, with Otis's orders increasing significantly throughout 2025 (Q4 up 43%). She anticipates modernization growth in the teens or more. Judy Marks noted the conservative nature of the EPS guidance. Cristina Méndez, Executive Vice President and CFO of Otis Worldwide Corporation, explained that the 6% EPS growth midpoint includes a stronger operational component ($0.15 growth) driven by accelerating service operating profit ($200 million growth), favorable FX ($0.08), and flat below-the-line impacts from interest rates offset by share buybacks and a positive tax rate.

Nick Housden from RBC Capital Markets requested a regional breakdown for the Q3 delivery guidance and asked for more detail on the supply chain composition behind the statement that 90% of U.S. trucks are built in the U.S.

Answer

CEO & Director R. Preston Feight suggested a 'plus or minus normal' regional split for Q3, noting the European summer shutdown and North American adjustments to match the market. Regarding the supply chain, he stated that while components come from various global regions, the critical final assembly occurs in PACCAR's North American factories, a key factor for policy considerations.

Nick Housden asked for a regional breakdown of the Q3 delivery guidance of 32,000-33,000 trucks and for more detail on the supply chain for the 90% of U.S. trucks that are built domestically.

Answer

CEO & Director R. Preston Feight suggested thinking of the Q3 delivery split in terms of 'plus or minus normal splits,' noting the standard three-week shutdown in Europe and production drops in North America to match the market. On the supply chain, he stated it is varied with components from many regions, but emphasized the critical importance of PACCAR's U.S. production facilities, which he believes the administration will support.