Otis: A Great Business, But Is The Premium Valuation Still Justified?
Otis Worldwide Corporation primarily generates profits from recurring maintenance and modernization services rather than new elevator installations. The company's revenue impact from China is decreasing, with service revenue now exceeding new equipment sales. Despite recent valuation compressions, the stock is considered fairly valued, leading to a Hold rating until better execution or a more appealing entry point is available.
- ▪Otis Worldwide derives most operating profit from recurring maintenance and modernization services, not new elevator installations.
- ▪China's revenue impact is diminishing, with service revenue now surpassing new equipment and signs of stabilization emerging.
- ▪Despite recent multiple compressions, OTIS is fairly valued.
- ▪Current valuation leaves limited room for more execution disappointments.
- ▪The author initiates coverage with a Hold rating, preferring stronger execution or a more attractive entry valuation before upgrading to Buy.
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