OTIS WORLDWIDE CORPORATION (OTIS): what the price assumes

Generated: 2026-08-08 · Source: https://boothcheck.com/report/OTIS

Headline

Field	Value
Ticker	OTIS
Company	OTIS WORLDWIDE CORPORATION
Sector / Industry	Industrials
Current price	$73.12/sh
Composition	New Equipment 35% / Maintenance and Repair 53% / Modernization 13%

What The Price Assumes (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

Field	Value
Inversion basis	whole-company
Operating margin (value-band context)	7.1%
Operating margin today	15.4%
Margin compression (value-band)	-8.3pp
Implied growth	-1.1%
Multiple paid	16x operating income

The operating-margin figure is value-band context at year 12: derived from the framework's value band, a separate calculation — not part of the priced-in solve.

Solve inputs: computed at a 7.5% cost of capital with 4% terminal growth over a 5-year stage; each 1pp of cost of capital moves the implied operating-profit growth ~6.4pp.

Reconcile: at the x-ray's 9.3% required return this reads ~8.6%/yr; the models below use their own rates.

How unusual the bet is: within-range

Reference	Value
vs own history	-0.26σ
cohort percentile (of 221 peers)	26
implied end-window share	0%

Valuation X-Ray

Every valuation family lands below the price. The price therefore sits beyond what those standard frames encode.

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

Family	Median price/FV	Models	Reads
Asset	—	0	—
Earnings	3.02x	3	expensive
Relative	—	0	—
Growth	—	0	—

Families that call it expensive: Earnings

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 7.0%); the inversion above states its own rate.

Per-Model Detail (n=3)

Model	Family	FV	Price/FV	Applicable	Methodology
DCF Perpetual Growth	Growth	$135.25	0.54x	no	FCF base $1.8B, growth 5% (input: historical growth), terminal g 4.0%, WACC 6.9%, 6yr projection
DCF Exit Multiple	Growth	$81.72	0.89x	no	Exit EV/EBITDA: 14.3x / 16.3x / 18.3x (bear / base = today's held flat / bull), 6yr
Relative Valuation	Relative	—	—	no	P/E 18x (static sector reference · 2026-04), scenarios: 15.1x / 18.0x / 20.9x (bear / base = reference held flat / bull), EV/EBITDA 12x
Simple DDM	Growth	—	—	no	—
Two-Stage DDM	Growth	—	—	no	—
Simple Excess Return	Asset	—	—	no	—
Two-Stage Excess Return	Asset	—	—	no	—
Discounted Future Market Cap	Growth	$56.26	1.30x	no	Rev $14.9B, growth 5% (input: historical growth; tapered), Terminal P/S: 1.6x / 1.9x / 2.2x (bear / base = today's held flat / bull, cap 8x)
Peter Lynch Fair Value	Relative	$46.68	1.57x	no	EPS $3.89, growth 10% (input: historical EPS growth), PEG=1.93 (Overvalued)
Margin Trajectory	Growth	—	—	no	—
Earnings Power Value	Earnings	$43.06	1.70x	no	Normalized EBIT (5y avg op income, one-time charges added back) $2.18B × (1−18%) / WACC 6.9% → EPV (no growth)
Residual Income	Asset	—	—	no	—
Graham Number	Asset	—	—	no	—
EV/EBITDA Relative	Relative	—	—	no	EBITDA $2.29B × sector EV/EBITDA 12.0x
FCF Yield	Earnings	$24.24	3.02x	yes	FCF $1712.0M / Kₑ 9.3% — zero-growth perpetuity
SBC-Adj FCF Yield	Earnings	$22.12	3.31x	yes	SBC-adj FCF $1.64B (FCF $1.71B − SBC $0.07B) capitalized at Kₑ
Ben Graham Formula	Earnings	$90.33	0.81x	yes	EPS $3.89 × (8.5 + 2×9.6%) × (4.4 / 5.3%)
ROIC-Justified P/B	Asset	—	—	no	—
P/Sales Sector	Relative	—	—	no	Revenue $14.91B × sector P/S 2.5x
PEG Fair Value	Relative	$56.04	1.30x	no	EPS $3.89 × (PEG 1.5 × growth 9.6% (input: historical EPS growth)) → PE 14.4x
Earnings Yield	Earnings	$42.05	1.74x	no	EPS $3.89 / required return 9.3% (Rf 4.3% + ERP 5.0%)
Funds From Operations Multiple	Relative	—	—	no	—
Clinical Phase NPV	Growth	—	—	no	—
Merton	Asset	—	—	no	—
V5 Mechanical	—	—	—	no	—

Economic-Unit Decomposition (Sum Of The Parts)

One or more material disclosed units has unresolved economics. Unknown/general is not evidence of homogeneity: segment SOTP is primary but incomplete, consolidated cash flow may remain only a secondary cross-check when every unit shares an enterprise basis, and one sector multiple or target margin is withheld.

Unit	Role	Valuation basis	Revenue	Reported profit	Value evidence	Status
New Equipment	operating	enterprise	$5.0b	$240.0m operating-income	withheld	unresolved no unit value
Service	operating	enterprise	$9.4b	$2.4b operating-income	withheld	unresolved no unit value

No total common-equity value is stated. One or more material units lack a supported unit value. The displayed values are an indicative subtotal; consolidated debt and cash cannot be applied to a fraction of the company.

Solvency

Field	Value
Net debt	$8.8b
Net debt / NOPAT (after-tax)	4.69x
Net debt / operating income (pre-tax)	3.85x
Interest coverage	10.0x
Share count CAGR (buyback)	-2.5%
Burning cash	no

Bullet Takeaways

• Otis maintains about 2.5 million elevators and escalators, and that book, not the machine sale, is where the money is: in the June quarter the Service segment earned 599 million dollars of segment operating profit against 40 million from New Equipment.
• The equipment side is where the damage is visible. New Equipment orders fell 5% at constant currency in that quarter, held down by a decline of more than 20% across Asia Pacific and a high-teens drop in China, and that segment's margin gave up 220 basis points to 3.1%.
• What to watch next is whether Service profit keeps pace with Service revenue. Revenue there grew 11% in the June quarter while segment profit grew about 4%, and the third-quarter report is the next read on whether that gap closes.

Bull Case

The frightening number in the June quarter came out of China. New Equipment orders fell 5% at constant currency, with low-teens growth in the Americas more than cancelled by a decline of over 20% across Asia Pacific and a high-teens drop in China. Elevators are a construction product. When construction stops, orders stop, and that segment's margin duly contracted 220 basis points to 3.1%.

Now look at what the segment actually contributes. In 2025 New Equipment sold 4.99 billion dollars of equipment and earned 240 million doing it. Service sold 9.44 billion and earned 2.37 billion. One line is a third of the revenue and under a tenth of the profit; the other is the company. Read that way, selling an elevator is closer to customer acquisition than to a sale, and a bad year for orders is a bad year for acquisition, not for earnings.

What the sale acquires is a contract on a machine that must be inspected by law, cannot be relocated, and lasts for decades. The 10-K sets out the ladder without ceremony: "A basic maintenance contract provides for inspection consistent with local regulatory needs. We offer incremental, tiered maintenance and service offerings, with varying levels of coverage up to and including comprehensive component replacement coverage." Roughly 2.5 million units sit on that basis. Revenue is booked evenly across the year because the obligation is continuous, which is another way of saying it behaves like a subscription with a legal mandate behind it.

Aging is the second engine, and it is running. Modernization takes an installed elevator and replaces its machine, its ropes, its controls or the car itself. The 10-K records that "the Company recognized $5.0 billion and $1.9 billion of revenue from new equipment and modernization contracts, respectively, for the year ended December 31, 2025", and in the June quarter modernization orders rose 9% at constant currency with backlog up 26% on the same basis. Backlog is the useful half of that: work already sold, not work hoped for.

The margin comparison is where the aftermarket stops being a story and becomes economics. Service ran a 23.2% segment margin in the June quarter. Across the building-systems cohort the market measures Otis against, ALLE runs a 20.8% operating margin, LII 19.7%, NVT 17.1%, FIX 16.5%, EME 10.4%, CARR 8.2% and ABM 3.5%. Installing and servicing building equipment is not usually a rich trade. Holding the maintenance right to your own installed base is a different trade entirely.

Capital allocation has been consistent with that reading. The share count has fallen about 2.5% a year since mid-2022. In the first half of 2026 the company put roughly 800 million dollars into repurchases and paid 330 million of dividends. Management has lifted its own outlook on five separate occasions since 2020. None of that needed the Chinese property market to come back.

Bear Case

Every elevator installed is a service contract awarded for the life of the building, which is why the machine itself is sold at something close to cost. Otis turned 1.28 billion dollars of June-quarter New Equipment sales into 40 million of segment operating profit, a 3.1% margin, and named the causes plainly: lower volume, unfavorable price, and mix. Unfavorable price, in a business that sells the machine to win the decades of maintenance behind it, is not a discounting problem. It is a competitor buying the annuity. Whoever installs the unit holds the maintenance right on it for the next thirty years, and Otis is installing fewer of them where the units are.

The channel makes that worse rather than better. The 10-K states that "We sell our New Equipment directly to customers, as well as through agents and distributors." and lists among its risks that "Adverse changes in our relationships with, or the financial condition, performance or purchasing patterns, or compliance practices of, key distributors and agents could adversely affect us." The same filing describes the buyers as "real-estate and building developers and general contractors who develop and/or design buildings for residential, commercial, retail or mixed-use activity". Those are the customers most exposed to a property downturn, reached partly through intermediaries Otis does not control.

The aftermarket is not immune either, which is the part a bull tends to skip. Service revenue rose 11% in the June quarter, to 2.58 billion dollars. Service segment operating profit rose 21 million, from 578 million to 599 million. The margin gave up 170 basis points to 23.2%, and the company attributed that to higher labor cost, higher material cost, and an unfavorable mix of work. Modernization grew 24% organically against 6% for maintenance and repair.

That is the tell. Service revenue grew at more than twice the pace of Service profit in that quarter. Modernization is real revenue, but it is project work quoted job by job, and it does not behave like the straight-line maintenance contract the 10-K describes.

The consolidated line flattered all of this. Company-wide operating profit rose 28 million dollars in the quarter, which reads as improvement until you ask where it came from. The release attributes the increase to the absence of the prior year's transformation costs, separation-related adjustments and other non-recurring items. Both segments compressed. The total rose because last year's charges did not repeat.

None of this is a stretched-multiple argument, and it would be dishonest to dress it as one. The market is paying about 16 dollars for each dollar of company-wide operating profit, and worked backwards that is consistent with operating profit sliding roughly 1.1% a year over the next five. The bar is low. The trouble is that both profit engines moved against it on margin in the same quarter, and a business does not need a demanding assumption to miss a modest one.

There is also nothing underneath. Otis carries a shareowners' equity deficit of 5.75 billion dollars, a legacy of the 2020 separation and of years in which repurchases ran ahead of retained profit. Book-value methods have nothing to measure here, and the standard fragility screens read a company that on paper holds no equity at all. Operating profit still covers the interest bill about ten times over, so this is a capital-structure fact rather than a distress signal. It does mean the downside has no asset floor beneath it. In the first half the company returned roughly 1.1 billion dollars to shareholders while operations generated 603 million after capital spending, and in May it priced 700 million dollars of 4.488% notes due 2029. The gap between those two figures gets funded somewhere.

Valuation

Two figures set the frame. Otis produced 2.29 billion dollars of operating profit on 14.91 billion of revenue in the twelve months through June 2026, a 15.4% operating margin. The market values the business at roughly 16 dollars for every dollar of that profit.

Run that backwards and the embedded assumption is unusually undemanding. The current level is consistent with company-wide operating profit shrinking about 1.1% a year across a five-year stretch, under a 7.5% cost of capital. It does not ask Otis to grow. It asks Otis not to erode. Each percentage point of movement in the discount rate swings that implied pace by roughly six points, so treat the figure as a direction rather than a measurement.

The methods that can be run here disagree, and the reason is worth stating plainly. Book equity is negative, so anything starting from balance-sheet value has nothing to work with. What remains splits in two. Approaches that assume no growth at all, capitalizing the last twelve months of free cash flow at the cost of equity, land far below where the shares trade. The approach that credits the earnings growth of recent years against the level of long-term rates lands above. The distance between those two is what is being paid for durability, not for expansion: the belief that a maintenance annuity does not decay.

Segment economics explain why that belief is not unreasonable. Otis recognized 4.99 billion dollars of New Equipment revenue in 2025 for 240 million of segment profit, and 9.44 billion of Service revenue for 2.37 billion. Against the cohort, the company-wide 15.4% operating margin sits well ahead of CARR at 8.2% and EME at 10.4%, and a little under ALLE at 20.8%. The spread inside that group is the useful part. Firms that sell and install building equipment earn single digits; firms holding recurring service rights keep a much larger slice of each sales dollar.

The balance sheet is the part that most needs translating. Operating profit covered the interest bill about ten times over in the twelve months through June 2026, on an interest charge of 230 million dollars. Operations generated 680 million in the first half. That is not a fragile company. It is a company with no book equity and a funding cost that is changing. Otis termed out at the bottom of the rate cycle, and the 10-K records what that looked like: "The proceeds from the August 2023 issuance of $750 million notes listed above were used to fund the repayments of Otis' commercial paper and €500 million 0.000% notes that were due in November 2023, with the remainder used for other general corporate purposes." In May 2026 the company priced 700 million dollars of 4.488% notes due 2029. Zero-coupon euro paper does not get refinanced at zero. Every maturity from here lifts the interest line, and the coverage that looks comfortable today was set by a rate environment that has gone.

Catalysts

The June quarter landed on July 22, 2026. Net sales came in at 3.86 billion dollars, up 7% with organic sales up 6%, driven by Service, where organic sales rose 9%. The company described that as matching its best Service growth since the 2020 separation. GAAP earnings per share rose 13% to 1.12 dollars. Modernization orders rose 9% at constant currency and modernization backlog rose 26% on the same basis, which is the clearest forward indicator in the release: backlog is work already contracted.

The full-year outlook was revised the same day. Management now guides to net sales of 15.1 to 15.3 billion dollars, with organic New Equipment sales down low single digits to flat and organic Service sales up mid to high single digits. The shape of that guide is the whole company in miniature: the equipment line is expected to shrink or hold, and the service line carries the year. Chief Executive Judy Marks framed the second half as a measured outlook resting on what she called a Service-led growth model.

Two things are worth tracking into the third-quarter report. The first is whether New Equipment orders outside China keep growing at the low-teens pace reported for the Americas, because the order book is what feeds the maintenance portfolio years later. The second is the Service margin, which has now given ground for two consecutive reported periods as modernization takes a larger share of the mix. Financing is the quieter item: the company priced 700 million dollars of 4.488% notes due 2029 in May, and repurchases ran about 400 million dollars in the June quarter alone.

Peer Cohorts (Per Segment, With Filing Citations)

New Equipment (reported)

• CARR (CARRIER GLOBAL CORPORATION)
• FY2025 10-K: …our products and services, we are a significant competitor with respect to each of our major product and service offerings. We believe that the loss of any individual contract or customer would not have a material adverse effect on our results. Raw Materials and Supplies We rely on suppliers and commodity markets to…
• FY2025 10-K: …7 Table of Contents Operating System We plan to continue to foster operational, financial and commercial excellence to drive sales and earnings growth. With roots in our legacy manufacturing and business processes, the Carrier operating system - Carrier Excellence - is our continuous improvement framework that is…
• JCI (JOHNSON CONTROLS INTERNATIONAL PLC)
• FY2025 10-K: …The amendments require that on an annual basis, entities disclose specific categories in the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold. In addition, the amendments require that entities disclose additional information about income taxes paid as…
• FY2025 10-K: …that the Company expects to recover. Costs to obtain or fulfill a contract are capitalized when incurred and amortized to expense over the period of contract performance. The following table presents the location and amount of costs to obtain or fulfill a contract recorded in the Company's consolidated statements of…
• ALLE (Allegion plc)
• FY2025 10-K: …security products and solutions based in the United States. Next Door is reported in the Company's Allegion Americas segment. Lemaar On March 1, 2025, the Company, through its subsidiaries, acquired Lemaar Pty Ltd ("Lemaar"), a global provider of security products and solutions based in Australia. Lemaar is reported…
• FY2025 10-K: …and exits. Exit devices, also known as panic hardware, provide rapid egress to allow building occupants to exit safely in an emergency. Door controls and systems include mechanical door closers, automatic door operators, as well as high-performance interior and storefront door systems. In addition, we offer a full…
• LII (LENNOX INTERNATIONAL INC)
• FY2025 10-K: …customers in the U.S. and Canada. AES manufactures curb, curb adapters, drop box diffusers and also offers HVAC recycling and salvage services, as well as focusing on multi-family HVAC replacement for expired mechanical assets. In the fourth quarter of 2025, we acquired Duro Dyne Buyer, Inc. ("Duro Dyne"), which…
• FY2025 10-K: …organization that focuses on new technology invention, product development, product quality improvements and process enhancements, including our development of next-generation control systems as well as heating, cooling and refrigeration products that include some of the most efficient products in their respective…
• AAON (AAON, INC.)
• FY2025 10-K: …plc), York Light Commercial (Bosch Home Comfort Group), Johnson Controls (Johnson Controls International PLC), Carrier (Carrier Global Corporation), and Daikin (Daikin Industries). Our thermal management products primarily compete with Vertiv (Vertiv Holdings Co.), STULZ (STULZ Air Technology Systems, Inc.), Munters,…
• FY2025 10-K: …on approximately 22.6 acres. In January 2025, we completed our new expansion of the West Plant which added 225,500 square feet of manufacturing/warehouse space and 12,000 of office space. The new expansion is included in the table amounts above. Our retail parts store, which is leased to a Representative of the…
• NVT (nVent Electric plc)
• FY2025 10-K: …and partnering with a strong channel and distribution network. Seasonality We generally experience increased demand for Electrical Connections products during the spring and summer months in the Northern Hemisphere. 2 Backlog of Orders by Segment December 31 In millions 2025 2024 $ change % change Systems Protection…
• FY2025 10-K: …original equipment manufacturers, panel builders and contractors. Our Systems Protection brands include nVent HOFFMAN, SCHROFF and TRACHTE. Electrical Connections Our Electrical Connections business provides innovative solutions that connect power and data infrastructure. Our offerings enhance end-user safety, reduce…

Service (reported)

• CARR (CARRIER GLOBAL CORPORATION)
• FY2025 10-K: …contractual maintenance and repair, digital monitoring and modifications/upgrades. The Climate Solutions Transportation segment provides climate and energy solutions for customers globally. Our products, services, systems and monitoring solutions offer reliable transport and preservation of food, medicine and other…
• FY2025 10-K: …transferred to a customer. Control is obtained when a customer has the ability to direct the use of and obtain substantially all of the remaining benefits from that good or service. A significant portion of the Company's performance obligations are recognized at a point-in-time when control of the product transfers…
• JCI (JOHNSON CONTROLS INTERNATIONAL PLC)
• FY2025 10-K: …services that are distinct from those transferred before the modification, they are accounted for prospectively as if the Company entered into a new contract. If the goods or services in the modification are not distinct from those in the original contract, sales and gross profit are adjusted using the cumulative…
• FY2025 10-K: 5-09-30 0000833444 us-gaap:OperatingSegmentsMember jci:APACSegmentMember 2023-10-01 2024-09-30 0000833444 us-gaap:OperatingSegmentsMember jci:APACSegmentMember 2022-10-01 2023-09-30 0000833444 us-gaap:CorporateNonSegmentMember 2024-10-01 2025-09-30 0000833444 us-gaap:CorporateNonSegmentMember 2023-10-01 2024-09-30…
• ABM (ABM INDUSTRIES INCORPORATED)
• FY2025 10-K: …support services to airlines and airports, including parking and transportation management, janitorial and maintenance services, passenger assistance, catering logistics, aircraft cabin maintenance, and transportation solutions. We typically provide services to clients in this segment under master services…
• FY2025 10-K: 5 Service Marks, Trademarks, and Trade Names We hold various service marks, trademarks, and/or trade names, such as "ABM," "ABM Building Value," "ABM GreenCare," "ABM EnhancedClean," "ABM EnhancedFacility," "Linc Service," "TEGG," "ABM Connect," "ABMVantage," "RavenVolt," and "Driving Possibility, Together," which we…
• EME (EMCOR Group, Inc.)
• FY2025 10-K: …needs such as critical systems power supply, fire protection systems, special environmental controls and high-purity air systems, sophisticated electrical and mechanical systems for data centers, new production lines in manufacturing plants, and office arrangements in existing office buildings. They are not usually…
• FY2025 10-K: 105634 us-gaap:OperatingSegmentsMember eme:CommercialSiteBasedServicesMember country:US eme:UnitedStatesBuildingServicesMember 2025-01-01 2025-12-31 0000105634 us-gaap:OperatingSegmentsMember eme:CommercialSiteBasedServicesMember country:US eme:UnitedStatesBuildingServicesMember 2024-01-01 2024-12-31 0000105634…
• FIX (COMFORT SYSTEMS USA, INC.)
• FY2025 10-K: …was established in 1997. We provide mechanical and electrical contracting services. Our mechanical segment principally includes heating, ventilation and air conditioning ("HVAC"), plumbing, piping and controls, as well as off-site construction, monitoring and fire protection. Our electrical segment includes…
• FY2025 10-K: …buildings. The service work that we do, which is discussed further below, usually does not give rise to lien rights. We also perform larger projects. Taken together, projects with contract prices of $2 million or more totaled $22.44 billion of aggregate contract value as of December 31, 2025, or approximately 93%,…
• ALLE (Allegion plc)
• FY2025 10-K: …offerings and respond to new technologies in a timely manner. Our growth is dependent, in part, on the development, commercialization and acceptance of new products and services. We must develop and commercialize new products and services that meet the varied and evolving needs of our customers and end-users in order…
• FY2025 10-K: …and software. For the year ended December 31, 2025, the Company's net revenues were $4,067.3 million. Net revenues are recognized based on the satisfaction of performance obligations under the terms of a contract. A performance obligation is a promise in a contract to transfer control of a distinct product or to…

Methodology Note

• Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
• Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
• Economic-unit decomposition (SOTP): each disclosed business unit is assigned its native valuation basis before any multiple is applied. Operating units are valued on enterprise value; funded financial units are valued on their own common equity, because their borrowings fund earning assets rather than levering the parent. A company total is stated only once every material unit carries a supported value and the parent capital bridge reconciles.
• Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
• Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.

Sources

Q2 2026 earnings release, July 22, 2026 · Q2 2026 earnings release and Q2 2026 Form 10-Q · Q2 2026 Form 10-Q balance sheet · prospectus supplement filed May 2026 · Q2 2026 Form 10-Q · prospectus supplement filed May 2026; Q2 2026 earnings release