Otis’s defensive 68% Service franchise and modernization runway outweigh temporary margin pressure, creating an attractive long-term compounding setup at $72.61.
Overview
Otis Worldwide (NYSE: OTIS) is the global leader in elevators, escalators, and moving walkways, combining a cyclical New Equipment business with a high-margin, recurring Service franchise. Service represents approximately 66%–68% of sales and benefits from maintenance contracts, repairs, and modernization across an installed base of approximately 2.5 million units. More than 70% of consolidated sales are international; for the twelve months ended December 31, 2025, the United States contributed $4.192 billion, China $1.650 billion, and other jurisdictions $8.589 billion. **The core investment case is a defensive service flywheel supported by scale, switching costs, and safety-critical demand.** Q2 2026 sales rose 7% to $3.859 billion and beat the $3.76 billion consensus, but adjusted operating margin fell 180 basis points to 15.2% and adjusted EPS declined 4% to $1.01. Management cut FY 2026 adjusted EPS guidance to $4.01–$4.05 while targeting approximately 25% Service margin by Q4. At $72.61, OTIS trades at 17.89x forward P/E and 16.15x P/FCF. The principal catalysts are Service productivity recovery, modernization backlog execution, Otis ONE adoption, and continued buybacks.