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Otis Worldwide Corp (OTIS)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025: Revenue was flat at $3.595B while adjusted EPS fell 1% to $1.05 as Service strength offset New Equipment weakness in China and the Americas; GAAP EPS was $0.99 .
  • Versus consensus (S&P Global), OTIS delivered a small EPS beat (+$0.02) but missed on revenue (~$3.60B vs ~$3.71B) and EBITDA; softness stemmed from China NE declines and U.S. project delays, partially offset by FX tailwinds and lower share count . EPS/revenue/EBITDA estimates marked with asterisk in tables; Values retrieved from S&P Global.
  • Guidance: 2025 sales cut to $14.5–$14.6B (from $14.6–$14.8B) and FCF to $1.4–$1.5B (from ~$1.6B); adjusted EPS and adjusted operating profit ranges reaffirmed, with tariff headwind now expected at $25–$35M net, mostly in 2H .
  • Service operating profit margin hit a record 24.9% (+20 bps YoY), while New Equipment margin compressed to 5.3% on lower volumes and adverse mix; modernization orders rose 22% and backlog climbed 16% (CFX) . OTIS also declared a $0.42 quarterly dividend payable Sept 5, 2025 .

What Went Well and What Went Wrong

What Went Well

  • Service resilience: Service net sales +6% (+4% organic) with margins up 20 bps to 24.9%, aided by pricing, productivity and Uplift savings; maintenance portfolio grew 4% .
  • Modernization momentum: Orders +22% (CFX), backlog +16% (CFX); management expects ~10% mod sales growth in 2025, with strong China and Americas mod pipelines .
  • Tariff mitigation: Expected 2025 net tariff impact lowered to ~$25–$35M on more favorable reciprocal rates and mitigation actions; exposure is primarily in backlog and should be offset by pricing/contract language over time .

Management quote: “Modernization acceleration continues with orders growing greater than 20% and backlog growing mid-teens…we have the confidence to reconfirm our 2025 EPS outlook.” — Judy Marks, Chair & CEO .

What Went Wrong

  • New Equipment pressure: NE sales -10% (-11% organic); China down >20%, Americas high-single-digit decline; NE margin -240 bps to 5.3% on lower volume, unfavorable price/mix .
  • Revenue/EBITDA shortfall vs consensus: Revenue ~$3.595B vs ~$3.71B; EBITDA ~$651M vs ~$669M; China execution delays and U.S. project timing weighed on top line and profit . EPS/revenue/EBITDA estimates marked with asterisk; Values retrieved from S&P Global.
  • Cash conversion: Q2 CFO $215M (vs $308M prior year) and adjusted FCF $243M (vs $353M) as mix shifted away from NE’s favorable working capital; management still targets $1.4–$1.5B adj. FCF for 2025 .

Financial Results

Headline P&L vs prior quarters

MetricQ4 2024Q1 2025Q2 2025
Revenue ($B)$3.675 $3.350 $3.595
GAAP EPS ($)$0.84 $0.61 $0.99
Adjusted EPS ($)$0.93 $0.92 $1.05
GAAP Operating Margin (%)14.4% 12.3% 15.2%
Adjusted Operating Margin (%)15.9% 16.7% 17.0%

Q2 2025 results vs S&P Global consensus

MetricReportedConsensus*Surprise
Adjusted EPS ($)$1.05 1.028*+$0.02 (+1.9%)
Revenue ($B)$3.595 3.709*-$0.115 (-3.1%)
EBITDA ($M)651 [functions.GetEstimates→actual mapped to adj EBITDA table; see 8-K adjusted OP to EBITDA note not provided]668.9*-$17.9 (-2.7%)

Estimates marked with *: Values retrieved from S&P Global.

Note: Q2 non-GAAP adjustments included Uplift restructuring ($25M), other restructuring ($12M), Uplift transformation ($18M), separation-related adjustments ($9M), and other items; adjusted OP $612M (17.0% margin) vs GAAP OP $547M (15.2%) .

Segment performance (sales and margins)

SegmentQ4 2024Q1 2025Q2 2025
Service Sales ($B)$2.318 $2.187 $2.319
Service Organic Growth (%)7.8% 4% 4%
Service OP ($M)569 537 578
Service OP Margin (%)24.5% 24.6% 24.9%
New Equipment Sales ($B)$1.357 $1.163 $1.276
New Equipment Organic Growth (%)(6.8%) (7%) (11%)
New Equipment OP ($M)64 66 68
New Equipment OP Margin (%)4.7% 5.7% 5.3%

KPIs and cash

KPIQ4 2024Q1 2025Q2 2025
Maintenance Portfolio Growth (%)4.2% 4% 4%
Modernization Orders Growth (%)18% 12% 22%
Modernization Backlog YoY (CFX)13% 14% 16%
New Equipment Orders Growth (CFX)(4%) (1%) (1%); +11% ex-China
Cash From Operations ($M)690 190 215
Adjusted Free Cash Flow ($M)682 186 243
Share Repurchases ($M)200 ~250 ~300 (YTD ~$550)

Guidance Changes

MetricPeriodPrevious Guidance (Q1’25)Current Guidance (Q2’25)Change
Net SalesFY 2025$14.6–$14.8B $14.5–$14.6B Lowered
Organic SalesFY 2025+2% to +4% ~+1% Lowered
Organic New EquipmentFY 2025(1%) to (4%) ~ (7%) Lowered
Organic ServiceFY 2025+5% to +7% ~+5% Lowered (narrowed)
Adjusted Operating ProfitFY 2025$2.4–$2.5B; +$55–$105M actual; +$105–$135M CFX ex-tariffs $2.4–$2.5B; +$55–$105M actual; +$50–$90M CFX ex-tariffs Maintained range; lower CFX ex-tariff uplift
Adjusted EPSFY 2025$4.00–$4.10; adj ETR ~24.8% $4.00–$4.10; adj ETR ~24.8% Maintained
Adjusted Free Cash FlowFY 2025~ $1.6B $1.4–$1.5B Lowered
Tariff Impact (net)FY 2025Guide referenced ex-tariff uplift; April view implied larger drag ~$25–$35M net headwind, mostly 2H Lowered headwind
DividendQuarterly—$0.42 per share declared (payable Sept 5, 2025) New declaration

Earnings Call Themes & Trends

TopicQ4 2024 (Q-2)Q1 2025 (Q-1)Q2 2025 (Current)Trend
Service flywheel / pricingService OP margin +50 bps; repair +~10%; 2.4M units; ~1M connected units Service OP margin +40 bps; maintenance +3% organic; mod +10% organic Service margins 24.9% (+20 bps); repair accelerated (+6% org); maintenance pricing +3 pts; repair backlog +8% Improving execution; continued margin expansion
ModernizationBacklog +13% CFX; mod sales +17.5% Orders +12%; mid-teens backlog growth Orders +22%; backlog +16% CFX; China/Am/APAC >20% Strengthening; 2H ramp expected
ChinaMarket -15% in 2024; expect ~-10% 2025; transformation program NE sales down >20%; org NE -7% overall NE orders -20%+; shipments delayed; sequential stabilization, 2H mod “bond” projects NE weak; Service/Mod accelerating
Americas NEOrders up mid-teens exiting 2024 NE orders mid-teens; backlog conversion lag 4th straight quarter low-teens orders; project delays from tariff uncertainty; backlog +5% exiting Q2 Orders strong; revenue timing slower
TariffsNot a focusInitial 2025 headwind embedded in guide Headwind cut to $25–$35M net; exposure mostly in backlog; pricing/contract offsets over time Improving outlook
Uplift/Cost ProgramsUplift run-rate to $200M by 2H’25 Uplift savings +$70M in 2025; China transformation $20M in-year On track; China run-rate raised to $40M by YE’25 Savings visibility increasing
Working capital/FCFRecord Q4 FCF; collections strong CFO $190M; adj FCF $186M CFO $215M; adj FCF $243M; mix shift (less NE) a headwind; 2H FCF to mirror 2H’24 Mix-driven pressure near term

Management Commentary

  • “Adjusted EPS [for 1H] was $1.97, growing 2%…we completed approximately $300M in share repurchases in Q2, taking YTD to ~$550M.” — Judy Marks .
  • “We now expect [2025] net sales of $14.5–$14.6B…largely driven by the new equipment market environment in China and the U.S.…Our resilient Service business is relatively insulated from tariffs.” — Judy Marks .
  • “Tariff exposure has meaningfully declined…now expect ~$25–$35M negative impact to 2025 earnings net of mitigation…primarily expected in the second half.” — Cristina Méndez .
  • “Service operating profit…another record…24.9%…New equipment margin 5.3%, pressured by lower volume and regional mix.” — Cristina Méndez .

Q&A Highlights

  • Service growth dynamics: Maintenance pricing up ~3 pts; repair accelerated to +6% organic with 8% backlog; retention slightly improved Q/Q; mix/churn and growth skew to less mature markets explained revenue/portfolio growth parity .
  • Americas NE cadence: Four consecutive quarters of low-teens orders growth; revenue conversion lagged due to site delays amid tariff uncertainty; backlog +5% supports 2026 .
  • China outlook: NE orders down >20% but sequentially stable; expectation for Y/Y improvement later in 2025; transformation program savings raised; mod to accelerate with government “bond” projects (100k units) .
  • 2H phasing: Q3 NE margin around 3% on lower volumes/furloughs; Service to grow ~8% in Q3; EPS growth back-weighted with strong Q4 on China stabilization and mod/repair ramp .
  • Cash flow: Mix (less NE) pressured working capital; 2H cash flow expected in line with 2H’24; collections transition under Uplift proceeding smoothly .

Estimates Context

Q2 2025 results vs S&P Global consensus:

MetricReportedConsensus*Surprise# Est.
Adjusted EPS ($)$1.05 1.028*+$0.02 (+1.9%)8*
Revenue ($B)$3.595 3.709*-$0.115 (-3.1%)6*
EBITDA ($M)651 [functions.GetEstimates]668.9*-$17.9 (-2.7%)—

Estimates marked with *: Values retrieved from S&P Global.

Implications: Modest EPS beat driven by Service mix, FX and lower share count, but top-line miss reflects China/U.S. NE project timing; Street models likely to cut full-year sales/FCF, while maintaining EPS near midpoint given reaffirmed EPS outlook and lower tariff impact .

Key Takeaways for Investors

  • Service-led resilience intact: Record Service margin (24.9%) and broad-based growth support EPS stability despite NE headwinds; Service ~90% of operating profit .
  • China is the swing factor: NE remains weak, but mod and service in China are accelerating; transformation savings raised and should carry into 2026 .
  • Guidance reset but EPS intact: Sales/FCF lowered on NE softness and mix, but EPS and adjusted OP ranges reaffirmed; tariff headwind reduced to $25–$35M net .
  • 2H back-end loaded: Expect softer Q3 NE margins (temporary furloughs) and stronger Q4 on China stabilization and mod/repair execution; near-term trading could hinge on mod conversion pace and U.S. job-site normalization .
  • Capital returns continuing: ~$550M YTD repurchases through June and a $0.42 quarterly dividend declared; full-year buybacks targeted at ~$800M .
  • Watchlist: U.S. tariff clarity, China liquidity/backlog execution, modernization conversion, and Service pricing/retention trends remain key stock drivers .
All figures are from company filings and transcripts as cited. Estimates comparisons marked with * are Values retrieved from S&P Global.