On Tuesday, Wolfe Research adjusted its stance on Otis Worldwide Corp (NYSE:OTIS) stock, changing the rating from Outperform to Peer Perform.
The firm cited the stock's recent rally as a reason for the adjustment, noting that the performance has aligned the stock's risk/reward balance with their projected fair value range for the year-end of 2025, which is between $86 and $125.
The firm observed that Otis has experienced a remarkable surge of approximately 15% over the past month. This increase followed the announcement of stimulus measures by China, aimed at supporting the country's real estate sector. According to the firm, these developments have significantly influenced the stock's performance.
The analyst from Wolfe Research pointed out that while investors often give the China new equipment market considerable weight, its actual contribution to Otis's sales in the estimated year 2024 is likely around 14-15%, and even less in terms of earnings per share, possibly close to 10%.
Despite this, the firm recognizes that the perception of Otis's business in China remains a major factor influencing sentiment in the Engineering & Construction sector.
The firm's commentary suggests that while the China market is important, it may not be as critical to Otis's overall performance as the market sentiment currently reflects. The downgrade reflects a recalibration of expectations in light of the stock's recent movements and the broader market dynamics at play.
Otis Worldwide Corp, known for its manufacture and service of elevators, escalators, and moving walkways, has thus seen its stock rating adjusted as market conditions and company valuation evolve.
The stock's performance and the firm's revised rating will be watched closely by investors as they consider the company's future prospects in a changing global market.
In other recent news, Otis Worldwide Corporation reported robust second-quarter results, with net sales totaling $3.6 billion. The company also announced a quarterly dividend of $0.39 per share, demonstrating continued financial stability.
Furthermore, Otis has appointed Cristina Méndez as Executive Vice President and Chief Financial Officer, offering her a revised compensation package that includes an annual base salary of $770,000 and a supplemental long-term incentive plan award valued at approximately $2,390,000.
Otis Korea, a subsidiary of Otis Worldwide Corporation, has achieved ISO 50001 certification for its Manufacturing & Engineering Center, reinforcing its commitment to energy efficiency and environmental sustainability.
This accomplishment adds Otis Korea to the 11 manufacturing factories under Otis Worldwide Corporation that have obtained the ISO 50001 certification.
Morgan Stanley initiated coverage on Otis with an Equalweight rating, acknowledging the strength of Otis's service-led business but also noting potential risks, particularly in the New Equipment business. Otis has also raised its full-year adjusted earnings per share outlook to a range of $3.85 to $3.90, projecting approximately 10% growth.
Looking ahead, Otis forecasts 2024 sales to be between $14.3 billion and $14.5 billion, with organic sales growth of 1% to 3%. The adjusted operating profit is projected to increase by $135 million to $175 million. These recent developments underscore Otis's resilience amid market challenges.
InvestingPro Insights
Recent data from InvestingPro adds depth to Wolfe Research's analysis of Otis Worldwide Corp (NYSE:OTIS). The company's market capitalization stands at $41.67 billion, reflecting its significant presence in the Machinery industry. Otis's stock has shown strong momentum, with a 13.77% return over the past month, aligning with Wolfe Research's observation of a 15% surge. This performance has pushed the stock to trade near its 52-week high, with the current price at 98.7% of that peak.
InvestingPro Tips highlight Otis's financial stability and growth potential. The company has raised its dividend for 4 consecutive years, demonstrating a commitment to shareholder returns. Additionally, Otis is profitable and analysts predict continued profitability this year. However, the stock's RSI suggests it may be in overbought territory, which could support Wolfe Research's decision to downgrade the rating.
For investors seeking a more comprehensive analysis, InvestingPro offers 11 additional tips for Otis Worldwide Corp, providing a deeper understanding of the company's financial health and market position.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.