Executive Summary

Q4 2024 was service-led: revenue rose 1.5% to $3.68B, adjusted EPS up 6.9% to $0.93, while New Equipment remained a headwind; adjusted operating margin expanded 30 bps to 15.9% on service mix and pricing .
Modernization accelerated: Q4 modernization sales +17.5% organically, orders +18%, with modernization backlog +13% at constant FX; maintenance portfolio units grew 4.2% to ~2.4M .
2025 outlook: organic sales +2–4%, adjusted EPS $4.00–$4.10, adjusted FCF ~$1.6B; UpLift run-rate savings raised to $200M by 2H25; China transformation to deliver $30M run-rate by YE25 (≈$20M in-year 2025) .
Capital returns: $200M Q4 buybacks ($1.0B FY) and dividend maintained; post-quarter board authorized a new $2B buyback (Jan 16) and declared a $0.39 quarterly dividend (Jan 30) .

What Went Well and What Went Wrong

What Went Well
- Service strength drove the quarter: service sales +7.6% (organic +7.8%), service segment OP +$54M at CFX, margin +50 bps to 24.5% on pricing and productivity (UpLift) .
- Modernization momentum: Q4 modernization organic sales +17.5%; backlog +13% CFX; management noted four consecutive quarters with mod margins above New Equipment and targeting double-digit mod margins medium term .
- Cash generation: Q4 CFO $690M and adjusted FCF $682M—the highest quarterly cash flow since spin, driven by collections and working capital reduction .
What Went Wrong
- New Equipment (NE) weakness: Q4 NE sales -7.4%, with >20% decline in China; NE margin fell to 4.7% (from 6.1% LY; 6.4% in Q3) on lower volume and adverse mix despite price/productivity/commodities aids .
- Orders/backlog pressure: Q4 NE orders -4% at CFX and NE backlog -4% at CFX; China remains the main drag despite strength in Americas and Asia Pacific .
- Service margins sequentially softened vs Q3 (24.5% vs 24.8%) as Otis onboarded ~2,000 field mechanics (5% increase) ahead of growth; management called it a necessary investment and noted seasonality .

Financial Results

Metric	Q4 2023	Q3 2024	Q4 2024
Revenue ($USD Billions)	$3.620	$3.548	$3.675
GAAP EPS ($)	$0.79	$1.34	$0.84
Adjusted EPS ($)	$0.87	$0.96	$0.93
GAAP Operating Profit ($M)	$522	$363	$531
Adjusted Operating Profit ($M)	$566	$599	$583
Adjusted Operating Margin (%)	15.6%	16.9%	15.9%
Service Segment OP Margin (%)	24.0%	24.8%	24.5%
New Equipment OP Margin (%)	6.1%	6.4%	4.7%

Segment breakdown

Metric	Q4 2023	Q3 2024	Q4 2024
New Equipment Net Sales ($B)	$1.466	$1.309	$1.357
Service Net Sales ($B)	$2.154	$2.239	$2.318
Total Net Sales ($B)	$3.620	$3.548	$3.675
New Equipment Segment OP ($M)	$89	$84	$64
Service Segment OP ($M)	$518	$555	$569
Total Segment OP ($M)	$607	$639	$633

KPIs and operating items

KPI	Q3 2024	Q4 2024
Organic Sales Growth (Total)	+1.2%	+1.9%
Service Organic Sales Growth	+7.7%	+7.8%
New Equipment Organic Sales Growth	-8.2%	-6.8%
Maintenance Portfolio Units Growth	+4.2%	+4.2%
Modernization Orders Growth	+3%	+18%
Modernization Backlog (YoY, CFX)	+12%	+13%
NE Orders (YoY, CFX)	-3%	-4%
NE Backlog (YoY, CFX)	-3%	-4%
Cash Flow from Operations ($M)	$394	$690
Adjusted Free Cash Flow ($M)	$381	$682
Share Repurchases ($M)	$200	$200

Non-GAAP adjustments: Q4 adjusted OP and EPS exclude restructuring (UpLift and other), transformation costs, separation-related items, litigation/impairment, and tax/interest from the German tax litigation; adjusted ETR 26.7% in Q4 (vs GAAP 26.9%) .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Net Sales (reported)	FY 2025	—	$14.1–$14.4B (down 1% to up 1%)	New
Organic Sales	FY 2025	—	+2% to +4%	New
Organic New Equipment Sales	FY 2025	—	-1% to -4%	New
Organic Service Sales	FY 2025	—	+6% to +7%	New
Adjusted Operating Profit	FY 2025	—	$2.4–$2.5B; +$55–$105M reported, +$120–$150M CFX	New
Adjusted EPS	FY 2025	—	$4.00–$4.10	New
Adjusted Effective Tax Rate	FY 2025	—	~24.8%	New
Adjusted Free Cash Flow	FY 2025	—	~ $1.6B	New
Share Repurchases	FY 2025	—	~ $800M (plan)	New
Bolt-on M&A	FY 2025	—	~ $100M (plan)	New
Dividend	Next payable	—	Declared $0.39/sh (Mar 7, 2025 pay date)	Maintained
Share Repurchase Authorization	Announced Jan 2025	—	New $2B authorization (Jan 16, 2025)	New

Note: Management also increased UpLift run-rate savings target to $200M by 2H25 and launched a China transformation program targeting $30M run-rate savings by YE25 (≈$20M in-year 2025) .

Earnings Call Themes & Trends

Topic	Q2 2024 (Q-2)	Q3 2024 (Q-1)	Q4 2024 (Current)	Trend
China NE market and pivot to Service/Mod	NE declines; service-led model; raised UpLift run-rate to $175M by mid-2025	China NE down ~15%; China revenue down ~$0.5B FY; ~1/3 China revenue now service; mod opportunity building	China transformation program; target >20% annual mod order growth; stabilize NE late 2025; $20M in-year, $30M run-rate savings	Increasing focus on China shift; NE still a headwind
UpLift cost program	Run-rate to $175M by mid-2025	Run-rate ~$120M exiting 2024; ongoing productivity tailwinds	Run-rate $200M by 2H25; total in-year savings ~$70M UpLift + ~$20M China in 2025	Upward target revision
Modernization	Mod orders +14%; backlog +15% (Q2)	Mod orders +3%; backlog +12% CFX (timing)	Mod orders +18%; backlog +13% CFX; mod margins > NE 4Q in a row	Reacceleration in Q4
Service portfolio	+4.2% growth; largest global portfolio	+4.2% growth; ~1M connected units; repair +~10%	+4.2% growth; service OP = 93% of overall OP in 2024	Stable growth, rising profit mix
Americas NE	Orders down 1H; improving; pricing gains	Orders >20%; sequential improvements; backlog visibility	Q4 orders +mid-teens; 2025 market +low single digits; Americas 2025 NE revenue down LSD on lower backlog	Improving demand
Pricing/Commodities	Global price up ex-China; commodity tailwinds	China NE pricing -~10% YoY; commodities tailwind; ex-China low-SD price up	2025 commodities ~flat; China price down a few points offset by cost-out	Tailwind fading to neutral

Management Commentary

“We generated $682 million of adjusted free cash flow in the quarter, which is our highest quarterly result since spin… and we are increasing the expected annual run rate savings to $200 million by the second half of 2025.” — Judy Marks, CEO .
“Service operating profit in 2024 accounted for 93% of our overall operating profit… margins expanded 60 bps to 24.6% for the full year.” — Cristina Méndez, CFO .
“We are transforming our China operations… targeting greater than 20% annual modernization order growth… and consolidating operations to deliver ~$20 million in 2025 savings, exiting with a $30 million annual run rate.” — Judy Marks .
“Adjusted EPS in the quarter grew approximately 7%… with strong operational performance and the benefit of a lower share count.” — Management .

Q&A Highlights

China transformation and savings: Management outlined $20M in-year 2025 savings (mostly NE) and $30M run-rate by YE25, while reinvesting to grow service portfolio and mod in China despite NE pricing down ~10% in 2024 .
Service margin cadence: Sequential decline vs Q3 driven by seasonal effects and proactive hiring of ~2,000 field professionals; Y/Y service margin still +50 bps in Q4, with level-loaded service growth expected in 2025 .
Americas trajectory: Orders sequentially improved through 2024; Q4 NE orders +~14% with broader vertical improvement; 18-month backlog visibility supports execution, though 2025 Americas NE revenue guided down low single digits on lower entering backlog .
Mod margins: Now above NE for the fourth consecutive quarter; management continues to target double-digit mod margins medium term .
2025 EPS phasing: Expect “flattish” 1H and stronger 2H on mod execution and cost savings; FX a larger headwind in 1H .

Estimates Context

Wall Street consensus from S&P Global (Capital IQ) was not retrievable at the time of this request due to API rate limits, so we cannot provide “vs. consensus” comparisons for Q4 or 2025 at this time. We anchored performance to company-reported results and guidance and will update “vs. Street” when S&P Global data becomes available.

Key Takeaways for Investors

Service flywheel intact: Service organic growth (+7.8%) and margin expansion are offsetting NE softness; service comprised 93% of 2024 operating profit, underscoring earnings resilience .
Modernization is the growth lever: Q4 mod orders +18% and backlog +13% CFX set up 2025; mod margins are now above NE and trending toward double-digit targets—an earnings mix positive .
China headwinds being proactively managed: New transformation program plus UpLift should cushion NE pressure; focus on conversions and recaptures to drive portfolio density and mod opportunity; stabilization assumed late 2025 .
2025 setup: Guide implies mid-single-digit OP growth (CFX) and 4–7% adjusted EPS growth; execution hinges on mod backlog conversion, service pricing, and delivering cost saves (~$90M in-year across programs) .
Phasing and FX: Expect 1H EPS to be flat with acceleration in 2H as savings ramp and mod execution improves; commodities tailwind fades to ~flat in 2025 .
Capital returns supportive: $1.0B FY24 buybacks and $2B new authorization (Jan 2025) plus dividend continuity ($0.39 declared Jan 30) provide downside support .
Watchlist: China NE demand and pricing, service margin trajectory post headcount additions, FX headwinds in 1H, and Americas orders sustainability into 2025 .

Otis Worldwide Corp (OTIS)·Q4 2024 Earnings Summary