OTIS

It has been about a month since the last earnings report for Otis Worldwide (OTIS). Shares have added about 1.4% in that time frame, underperforming the S&P 500. Will the recent positive trend continue leading up to its next earnings release, or is Otis Worldwide due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the latest earnings report in order to get a better handle on the important drivers. Otis Worldwide reported mixed second-quarter 2026 results, wherein earnings beat the Zacks Consensus Estimate but declined year over year. Meanwhile, net sales surpassed the consensus mark and increased from the prior year's reported figure.Despite continued strength in the Service business, the company reduced full-year adjusted EPS, adjusted operating profit and free cash flow guidanceOtis' second-quarter performance reflected continued momentum in its Service business, driven by strong modernization and repair activity, accelerating maintenance trends and robust backlog growth. However, higher investments in Service initiatives and continued weakness in the New Equipment business weighed on profitability. OTIS reported adjusted earnings per share (EPS) of $1.01, beating the Zacks Consensus Estimate of $1.00 by 1%. In the year-ago quarter, it reported adjusted EPS of $1.05.Net sales of $3.86 billion surpassed the consensus mark of $3.72 billion by 3.7% and increased 7.3% from $3.60 billion reported in the year-ago quarter. Organic sales increased 6% year over year, led by continued strength in the Service segment. Modernization orders increased 9% at constant currency, while modernization backlog expanded 24% year over year, highlighting healthy demand across the business.Adjusted operating margin contracted 180 basis points (bps) year over year to 15.2%, reflecting unfavorable segment performance and ongoing investments in strategic Service growth initiatives, partly offset by a favorable business mix. Service: Net sales from the segment increased 11% year over year to $2.58 billion. Organic sales rose 9%, driven by broad-based strength across maintenance, repair and modernization activities. Our model estimated organic sales for the segment to grow 5.4%.Organic maintenance and repair sales increased 6%, while organic modernization sales jumped 24% from the prior-year quarter. Segment operating profit increased to $599 million from $578 million a year ago. However, segment operating margin contracted 170 bps year over year to 23.2% as higher labor costs, ongoing investments in strategic Service initiatives, productivity headwinds, material costs and unfavorable mix more than offset higher volume and favorable pricing.New Equipment: Net sales from the segment were $1.28 billion, flat year over year. Organic sales decreased 1%, reflecting a high-teens decline in China and a mid-single-digit decline in EMEA, partly offset by approximately 10% organic growth in the Americas and low single-digit growth in Asia Pacific. Our model predicted organic sales for the New Equipment segment to decrease 3.3%.New Equipment orders declined 5% at constant currency, while backlog increased 3% at actual currency and 4% at constant currency.Segment operating profit declined to $40 million from $68 million in the year-ago quarter. Segment operating margin contracted 220 bps year over year to 3.1%, primarily due to lower volume, unfavorable pricing and adverse mix. Net cash provided by operating activities totaled $267 million during the second quarter compared with $215 million in the prior-year period.Free cash flow improved to $223 million from $179 million a year ago, while adjusted free cash flow increased to $290 million from $243 million. During the quarter, the company repurchased approximately $400 million of shares, underscoring its continued focus on returning capital to shareholders. Otis reaffirmed its 2026 net sales outlook of $15.1-$15.3 billion, implying approximately 4.6-6% year-over-year growth. Organic sales growth is also still expected in the low to mid-single-digit range.Organic New Equipment sales are now expected to range from down low single digits to flat, compared with the previous outlook of flat to low single digits. Organic Service sales guidance remained unchanged at mid to high-single-digit growth.The company lowered its adjusted operating profit outlook to approximately $2.4 billion from the previous expectation of approximately $2.5 billion. Adjusted EPS is now expected in the range of $4.01-$4.05, down from the prior outlook of $4.20-$4.24.Otis also reduced its adjusted free cash flow guidance to $1.50-$1.55 billion from the previous $1.60-$1.65 billion. In the past month, investors have witnessed a downward trend in estimates review. The consensus estimate has shifted -5.09% due to these changes. At this time, Otis Worldwide has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock has a grade of C on the value side, putting it in the middle 20% for this investment strategy. Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in. Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Otis Worldwide has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Otis Worldwide Corporation (OTIS) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Generac Holdings Inc. GNRC reported second-quarter 2026 adjusted earnings per share (EPS) of $2.91, which beat the Zacks Consensus Estimate of $1.95. GNRC registered an adjusted EPS of $1.65 in the prior-year quarter.Net sales were $1.173 billion, up 11% from $1.06 billion in the prior-year quarter. The figure missed the consensus estimate by 0.4%. Strength in the Commercial & Industrial (C&I) segment, particularly the data center market, remained the key catalyst, along with a $71 million pre-tax benefit from tariff refunds. GNRC still expects full-year 2026 net sales growth in the mid-to-high teens, including an approximately 2% favorable contribution from foreign currency, acquisitions and divestitures. C&I sales are projected to grow in the low-30% range, while Residential sales are forecasted to increase in the high-single-digit range.However, the net income margin before noncontrolling interests is now forecasted at 9-10%, above the previous 8-9% range. Adjusted EBITDA margin is now expected at 20-21%, up from the prior range of 18.5-19.5%. The tariff refund recorded in the second quarter should add about 1.5% to the full-year margin. Image Source: Zacks Investment Research GNRC is up 10% in pre-market trading today. The stock has gained 8% compared with the Manufacturing-General Industrial industry’s growth of 7.5% in the past year. Beginning in the first quarter of 2026, Generac has reorganized its segments to align with changes announced at its Investor Day held earlier this year. The company’s two reportable segments are now Residential and C&I. The Residential segment consists of the former Domestic segment without the domestic C&I operations. The C&I segment consists of the former International segment, plus the domestic C&I operations. C&I revenues totaled $556.5 million, up 29% year over year, while the data center backlog reached about $1.6 billion. This included a 6% net favorable impact from the combination of acquisitions, divestitures and foreign currency. Core growth came from the data center market, while higher rental and telecom shipments more than offset weaker domestic industrial distributor shipments.Generac also highlighted a global supply agreement with a hyperscale data center client that it signed during the quarter and added that, with the recent finalization of product-specific terms, the commitment is nearly $700 million of volume for 2027. GNRC has also secured a global supply agreement with a second hyperscale customer and is currently holding negotiations for final product-specific terms for 2027 and 2028 volumes. Notably, the data center backlog excludes committed volumes from the second hyperscale customer.During the quarter, Generac completed the Enercon acquisition. It purchased an additional facility in Belvidere, IL, to support large-megawatt generator packaging. Generac Holdings Inc. price-consensus-eps-surprise-chart | Generac Holdings Inc. Quote Revenues from Residential were down 2% year over year to $621.3 million. Lower energy storage system and portable generator shipments drove the decline, largely offset by higher home standby generator sales. Gross profit increased to $521.8 million from $416.7 million, and gross margin widened to 44.5% from 39.3%. Tariff refunds added roughly 6% to gross margin. Favorable pricing partly offset unfavorable sales mix and higher input costs.Operating expenses increased 2% to $311.4 million, reflecting investments to support C&I growth and higher intangible amortization, partly offset by lower legal expenses. Operating income advanced 88.2% to $210.4 million. Adjusted EBITDA reached $290.7 million, or 24.8% of sales, compared with $187.6 million, or 17.7%, a year earlier. Net cash provided by operating activities increased to $121.2 million from $72.2 million in the year-ago quarter. Free cash flow rose to $62.9 million from $14.5 million in the year-ago quarter, supported by higher operating earnings, particularly cash receipts from tariff refunds.At June 30, 2026, cash and cash equivalents totaled $264.9 million, down from $265.5 million as of March 31. Long-term borrowings and finance lease obligations were $1.25 billion. Generac currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. Otis Worldwide Corporation OTIS reported second-quarter 2026 results wherein EPS of $1.01 beat the Zacks Consensus Estimate by 1%. In the year-ago quarter, it reported an adjusted EPS of $1.05. OTIS’ net sales of $3.9 billion surpassed the consensus mark by 3.7% and increased 7.3% on a year-over-year basis. Organically, net sales were up 6% year over year. Shares of OTIS have declined 14.9% in the past year.Dover Corporation DOV posted second-quarter fiscal 2026 adjusted earnings of $2.74 per share, up 12% year over year. The figure topped the Zacks Consensus Estimate of $2.72. Dover Corporation’s quarterly revenues increased 7% year over year to $2.19 billion, but missed the consensus estimate of $2.21 billion. Shares of DOV have gained 11.4% in the past year.Graco Inc.’s GGG second-quarter 2026 adjusted earnings of 91 cents per share rose 17% from the year-ago quarter. The bottom line topped the Zacks Consensus Estimate by 12.4%. Graco’s net sales inched up 3% year over year to $590.6 million but lagged the consensus estimate by 3%. Shares of GGG have declined 1.4% in the past year. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Generac Holdings Inc. (GNRC) : Free Stock Analysis Report Dover Corporation (DOV) : Free Stock Analysis Report Graco Inc. (GGG) : Free Stock Analysis Report Otis Worldwide Corporation (OTIS) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Our analysts just identified a stock with the potential to be the next Nvidia. Tell us how you invest and we'll show you why it's our #1 pick. Tap here. Achieved significant top-line momentum with 6% organic sales growth, led by a 24% surge in modernization and double-digit repair growth. Attributed service margin compression to deliberate strategic investments in service excellence and higher-than-anticipated labor and material inflation. Identified productivity headwinds stemming from the extended onboarding time required for newly hired mechanics to reach full effectiveness in highly skilled activities. Announced a plan to work structurally on a new service operating model to standardize core field and sales processes and drive frontline excellence across its operating territories. Reported stabilization in the New Equipment segment, with the Americas delivering 10% growth and China performance aligning with management's expectations. Acknowledged that while service quality metrics improved by seven points in target areas, customer retention benefits are taking longer than expected to materialize. Strategic pivot toward high-value service segments and proactive repair offerings to drive customer uptime and long-term portfolio growth. Tempered the implementation of AI micro-pricing in the maintenance segment to prioritize customer retention, resulting in a $20 million full-year headwind. Anticipates a sustained recovery in service margins in the second half of 2026, targeting approximately 25% by the fourth quarter. Assumes the majority of current productivity pressures are temporary and will be mitigated as the new Service Operating Model matures. Expects New Equipment to return to positive growth in the second half of the year, supported by a backlog that increased 4% at constant currency. Maintains a robust outlook for modernization with double-digit growth expected across all regions, fueled by an aging global installed base. Lowered full-year adjusted EPS guidance to $4.01-$4.05 to reflect productivity headwinds, tempered pricing, and a $0.04 negative foreign exchange impact. Recognized a $50 million incremental headwind versus prior outlook due to labor rate increases and material inflation for non-Otis equipment parts. Completed the 'UpLift' transformation program, which shifted the frontline away from transactional activities toward customer-centric roles. The company is making strategic investments in service excellence and pricing, with $15 million invested this quarter to drive customer retention and pricing upsides. One stock. Nvidia-level potential. 30M+ investors trust Moby to find it first. Get the pick. Tap here. Management expects 150 basis points of margin expansion in the second half, driven by repair pricing flow-through and modernization volume. SG&A savings from recent restructuring of non-frontline activities will contribute approximately 30 basis points to the margin improvement. Management clarified that retention challenges are not due to price elasticity or competition from independent service providers. The delay is attributed to the multi-year nature of contracts and residual effects from previous service quality issues that the current investments aim to fix. Otis has locked in 98% of its commodity needs for the remainder of 2026, mitigating immediate risks from steel price volatility. Management emphasized the ability to adjust pricing locally to offset inflation, particularly as maintenance contracts come up for renewal.

FARMINGTON, Conn., July 23, 2026 /PRNewswire/ -- The Otis Worldwide Corporation (NYSE: OTIS) Board of Directors today declared a quarterly dividend of $0.44 per share of Otis' common stock. The dividend will be payable on September 11, 2026, to shareholders of record at the close of business on August 14, 2026. About Otis Otis gives people freedom to connect and thrive in a taller, faster, smarter world. The global leader in the manufacture, installation, service and modernization of elevators and escalators, we move 2.5 billion people a day and maintain approximately 2.5 million customer units worldwide – the industry's largest Service portfolio. You'll find us in the world's most iconic structures, as well as residential and commercial buildings, transportation hubs and everywhere people are on the move. Headquartered in Connecticut, USA, Otis is 72,000 people strong, including 45,000 field professionals, all committed to manufacturing, installing and maintaining products to meet the diverse needs of our customers and passengers in more than 200 countries and territories. To learn more, visit www.otis.com and follow us on LinkedIn, YouTube, Instagram and Facebook @OtisElevatorCo. Cautionary Statement This release includes statements related to anticipated earnings, cash flow and dividends that constitute "forward-looking statements" under the securities laws. All forward-looking statements involve risks, uncertainties and assumptions that may cause actual results to differ materially from those expressed or implied in the forward-looking statements. Past dividends provide no assurance as to future dividends. The payment and amount of future dividends could vary significantly from past amounts due to a number of risks and uncertainties. Risks and uncertainties include: (1) the effect of economic conditions in the industries and markets in which Otis and its businesses operate in the U.S. and globally and any changes therein, including financial market conditions, fluctuations in commodity prices, interest rates and foreign currency exchange rates, future availability of credit and factors that may affect such availability or costs (including tighter credit conditions), levels of end market demand in construction, pandemic health issues, natural disasters and the financial condition of Otis' customers and suppliers; (2) risks associated with indebtedness; (3) challenges in the development and production of new products and services; and (4) the effect of changes in laws and regulations, political conditions and geopolitical conflicts in countries in which we operate and other factors beyond our control. The above list of factors is not exhaustive or necessarily in order of importance. For additional information on identifying factors that may cause actual results to vary from those stated in forward-looking statements, see the reports of Otis on Forms 10-K, 10-Q and 8-K filed with or furnished to the SEC from time to time. Any forward-looking statement speaks only as of the date on which it is made, and Otis assumes no obligation to update or revise such statement, whether as a result of new information, future events or otherwise, except as required by applicable law. View original content:https://www.prnewswire.com/news-releases/otis-declares-quarterly-dividend-of-0-44-per-share-302833623.html

Image source: The Motley Fool. Wednesday, July 22, 2026 at 8:30 a.m. ET Senior Vice President, Treasurer, and Interim Head of Investor Relations - Imelda Sutu Chair, CEO, and President - Judy Marks Executive Vice President and Chief Financial Officer - Cristina Mendez Operator: Good morning. Welcome to Otis' second quarter 2026 earnings conference call. This call is being carried live on the internet and recorded for replay. Presentation materials are available for download from Otis' website at www.otis.com. I'll now turn it over to Imelda Sutu, Senior Vice President, Treasurer, and Interim Head of Investor Relations. Please go ahead. Imelda Suit: Thank you, Krista. Welcome to Otis' second quarter 2026 earnings conference call. On the call with me today are Judy Marks, Chair, CEO, and President, and Cristina Mendez, Executive Vice President and CFO. Please note, except where otherwise noted, the company will speak to results from continuing operations, excluding restructuring insignificant non-recurring items. A reconciliation of these measures can be found in the appendix of the webcast. We also remind listeners that the presentation contains forward-looking statements which are subject to risks and uncertainties. Otis' SEC filings, including our Forms 10-K and 10-Q, provide details and important factors that could cause actual results to differ materially. I'd like to turn the call over to Judy. Judy Marks: Thank you, Imelda. Good morning, afternoon, and evening, everyone. Thank you for joining us. We hope everyone listening is safe and well. Starting on slide three, we achieved significant top-line growth as we delivered a solid quarter with a significant step-up in organic sales growth, driven by accelerating service growth and improving trends in new equipment, along with strong cash generation. Service remains the key growth engine of the business, with 9% organic sales growth supported by 24% modernization growth, double-digit repair growth, and accelerating maintenance trends. Modernization orders were up 9% to end the quarter with a backlog up 26% at constant currency. We strongly believe that the investments we are making in capacity, quality, pricing, and commercial execution are enhancing our competitive position and yielding continued growth in our service business. In new equipment, we're encouraged by the sequential improvement in sales and the stabilization in margins. While orders were down 5% in the quarter, backlog increased 4% at constant currency and the business is showing greater stability, supported by a sales turnaround in the Americas at a robust 10% growth. We delivered another quarter of strong cash generation with adjusted free cash flow of $290 million, up 19% year-over-year. The strength of our cash flow reflects the resilience of our business model. Importantly, this allows us to continue investing in growth and strategic investments, including the acquisition of a majority stake in WeMaintain, while also returning a significant portion of free cash flow to shareholders through share repurchases and dividends. In the first half of 2026, we bought back approximately $800 million of shares and raised our dividend 5%, returning over $1.1 billion to our shareholders. These results reflect our progress in executing our strategy and investing and strengthening our service business. Service margins declined year-over-year as labor and material cost increases have added pressure on margins as we ramp up our operations to execute on our strong repair and modernization backlog. With continued service revenue growth, we expect a sustained recovery in margins in the next quarters. With that, let me turn to our second quarter financial results on slide four. Otis delivered net sales of $3.9 billion with organic sales up 6%. Adjusted operating profit, excluding a $7 million foreign exchange tailwind, decreased by $32 million in the quarter as higher volume and price were offset by inflation, mix, and productivity impacts. Adjusted operating profit margin declined 180 basis points to 15.2%. Adjusted EPS declined 4% or $0.04 in the quarter due to operational performance, partially offset by favorable foreign exchange rates. I want to take a step back and look at the significant transformation journey we've been on as shown on slide five. From 2020 to 2025, we drove growth through a focus on boosting the size of our portfolio, introducing innovative products like Gen3 and Gen360, connecting 1.1 million units on Otis ONE, and industrializing our modernization business. With keen operational focus, we optimized and developed resiliency in our supply chain and executed on UpLift in China transformation programs. These programs yielded sustained operational performance improvement over the past five years. Starting this year, we added four operational initiatives. First, we drove value-driven AI micro pricing across maintenance and repair. Second, we shifted our portfolio mix focus toward high-value service segments and geographies. Third, we took a proactive approach in our repair offering to drive customer uptime and service growth. Fourth, we made a strategic decision to invest in service quality through our service excellence initiative to sustain portfolio growth in our key markets in the Americas and EMEA. We are seeing early signs of progress in this area and an opportunity to build a stronger operating foundation. The investment in service quality impacted margins in the short term, but we see it as necessary to fuel our growth. Service quality leads to customer satisfaction and retention, which feeds our flywheel for service volume growth across maintenance, repair, and modernization. Today, we're sharing our plan to work structurally on our service operating model, which will drive frontline excellence. It's a program to unlock the full value of our operating potential at the local level, where our 45,000 field colleagues serve our customers every day. This will be a natural extension of the transformation we started with UpLift, which freed the frontline from transactional activities to become more customer-centric. We will standardize our core field and sales processes and drive operational excellence across our frontline. Our service operating model will leverage the learnings from the tactical investments we're undertaking in service excellence, which as I said, are delivering promising results. We have exceptional operating territories across our network that consistently deliver robust growth, excellent customer service, and strong operational performance. Our objective is to systematically use standardized systems and tools to consistently bring every operating territory to this level of excellence. Our focus on the frontline is the logical next step in our journey since Spin to build a more consistent, high-performance company. We still have work to do to get there. Slide six summarizes our progress in service margins, which improved sequentially in Q2. We are still seeing pressure largely from productivity and cost headwinds and the timing of our micro pricing actions. In Q1, we communicated a plan to invest $50 million in service excellence and pricing, with the goal to drive retention improvement and pricing upsides in maintenance and repair. We have invested $15 million in the quarter, on track with the plan, and we are encouraged to see a step-change improvement in our service quality metrics. Our service quality index has improved seven points in the operating territories targeted in the investment plan. In a good portion of these operating territories, we have also seen retention improvement, but the recovery timing varies. Although our overall retention rate ex China was down this quarter, we believe this will improve as we continue to provide high-quality service to customers. On cost and pricing, we were able to broadly offset the impact of the Middle East conflict with pricing actions and saw a strong ramp-up of our micro pricing initiatives in the repair business. Productivity and cost headwinds were higher than we anticipated this quarter. This has been driven by three main factors. First, our ongoing strategic investments in service excellence impacted productivity, and together with inflationary increases, led to higher-than-expected labor and material costs. Second, as we ramped up resources to execute a strong repair and mod backlog, workforce onboarding took longer than expected for newly hired mechanics to reach full effectiveness, especially for highly skilled activities in repair and modernization. Third, the acceleration of mod and repair execution required higher labor rates to make resources available where and when needed. We believe a large part of these headwinds are temporary while we adjust our operations through our service operating model to deliver on our growing backlog. With that, I'll turn it over to Cristina to walk through our segment results in more detail. Cristina Mendez: Thank you, Judy. Starting with service on slide seven. Service organic sales grew 9%, with growth across all lines of business and regions. Maintenance and repair organic sales increased 6%, representing a meaningful sequential acceleration. Maintenance organic sales grew 3%, supported by 3% portfolio growth and 3% pricing, partially offset by mix and churn. Repair sales continued to gain momentum, growing 12% and delivering the strongest performance in the past 10 quarters. Modernization remained a standout, with organic sales increasing 24%, marking the highest growth rate since the Spin. Growth was supported by a strong customer demand and execution against a robust backlog, which continues to be driven by ongoing orders growth. Modernization orders increased 9% in the quarter, driven by a strong order growth in China, up significantly. EMEA and APAC, both up low single digits, partially offset by Americas down mid-single digits due to a tough compare year-over-year. Modernization backlog remains very strong, up 26% year-over-year at constant currency. We remain confident in the long-term repair and modernization opportunity, supported by an aging install base that continues to drive customer demand and create attractive growth opportunities over the long term. The broad-based growth across our service business reflects the progress we are making in executing our strategy and demonstrates that our focus on driving growth is delivering tangible results. Service operating profit of $599 million, increased $16 million at constant currency. A higher volume and favorable pricing more than offset higher labor costs, including the impact of ongoing strategic investments and productivity, material cost headwinds, and unfavorable mix. Service operating margin was 23.2%, down 170 basis points versus the prior year. Margin performance is impacted by mix with higher modernization growth, cost and productivity headwinds, and reflects deliberate investments to support service quality initiatives and capacity to execute on service growth. Turning now to new equipment on slide eight. New equipment organic sales declined 1% in the quarter. While market conditions remain challenging, this represents the lowest rate of decline in the past nine quarters. Growing in America and Asia Pacific was more than offset by lower sales in China and EMEA. America sales increased 10%, supported by a strong backlog conversion and a healthy backlog built through orders growth in prior periods. Asia Pacific sales grew low single digits, driven by a strength in Japan and India, partially offset by lower sales in Korea. EMEA sales declined 4%, primarily due to weakness in the Middle East and Southern Europe. In China, new equipment sales declined high teens in the quarter, consistent with the backlog decline, but reflecting a slight sequential improvement. New equipment orders declined 5% year-over-year as a double-digit growth in the Americas and low single-digit growth in EMEA were more than offset by declines in APAC due to tough compares and in China. New equipment backlog increased 4% year-over-year at constant currency, 9% excluding China, providing good visibility into future sales and supporting our confidence in new equipment stability over the coming quarters. New equipment operating profit of $40 million, declined $30 million at constant currency, and operating margin declined 220 basis points to 3.1%, in line with our expectations. The operating profit decline was driven by lower volume, unfavorable price, and mix. Looking ahead, we remain focused on executing our priorities, managing price, volume, and cost as we navigate a dynamic new equipment market environment. With a growing backlog, the China market sequentially improving, and a strong market demand in many of our geographies, we are positive about the new equipment prospects going forward. Let me now turn it over to Judy to discuss the outlook for the remainder of the year. Judy Marks: Thank you, Cristina. Turning to slide nine. Our sales outlook and market expectations remain unchanged. We continue to expect the global new equipment market to stabilize with growth in all regions except China. Our global outlook for modernization remains robust with double-digit growth across all regions. We're watching the Middle East conflict, but do not expect a significant impact to our outlook. We expect net sales of $15.1 to $15.3 billion with organic sales growth of low to mid-single digits. The quarter reinforced our confidence in the sales growth trajectory of the business. We continue to see strong top-line momentum, particularly across our service segment, while we take actions to strengthen service quality, backlog execution, and customer retention to sustain growth. While our revenue outlook remains unchanged, our focus remains on executing the investments in service quality, balancing productivity and cost management, and converting strong demand into sustainable earnings growth over time. With that, let me turn to slide 10 and discuss the key areas of focus and the progress we're seeing. As we have discussed earlier this year, our priorities have been clear. Ramp up top-line growth by converting the robust modernization backlog, coupled with our strong growth momentum in repair, capture the flow-through of our micro-pricing initiatives, improve service quality to strengthen retention, and execute cost reductions in non-frontline related activities. We are seeing progress in the acceleration of modern repair sales and in micro-pricing initiatives in the repair business. However, we have not yet seen a significant improvement in retention. It is taking longer than expected. Because of that, we're tempering our AI micro-pricing implementation and maintenance to balance this. We expect this headwind to have about $20 million impact versus our prior outlook for the full year. In addition, while we've executed on our cost reduction program and expect to realize savings for the balance of the year consistent with our prior outlook, we have experienced productivity and cost impacts as discussed previously. We estimate this headwind to have a $50 million incremental impact versus our prior full-year outlook. While productivity remains below our original expectations, we continue to believe that the majority of these pressures are temporary and the actions we're taking today, together with our service operating model program, will support stronger sustained performance over time. In summary, there are three takeaways. Revenue growth remains strong, our service quality metrics are improving, and our operational initiatives are progressing. While the timing of retention benefits has shifted and we have observed headwinds in productivity and cost, we are as confident as ever in our strategy and our service flywheel. With that, let me turn it over to Cristina to summarize our financial outlook. Cristina Mendez: Thank you, Judy. Turning to our financial outlook on slide 11. We now expect adjusted operating profit to be in the range of down $30 million to flat on an actual currency basis. In the range of down $45 million to $15 million at constant currency. The revision reflects the retention and tempered maintenance micro-pricing impacts, as well as the productivity and cost headwinds mentioned earlier. Our adjusted free cash flow is now expected to be between $1.5 billion-$1.55 billion, in line with the operating profit outlook change. Moving to the 2026 EPS bridge on slide 12. The reduced operating profit outlook will result in an adjusted EPS range of $4.01-$4.05. The change versus the previous outlook reflects the adjustments from retention, pricing, productivity, and cost, as well as a negative impact of $0.04 due to foreign exchange. Providing some color on the third quarter, we expect service organic sales to remain strong at mid-single-digit growth, mainly driven by repair and modernization that will continue to grow on the back of the strong orders momentum. New equipment organic sales trend versus prior year is expected to continue to improve sequentially. Total adjusted operating profit is expected to be flattish in the third quarter, but with the impact of tax rate calendarization, we anticipate that it will result in an adjusted EPS decline at a level similar to the first half of the year. For the balance of the year, we expect momentum to build in the second half as the operational actions Julia outlined continue to take hold. Service profit should improve sequentially as productivity increases and the benefits of our initiatives begin to materialize. Together with recovering new equipment volumes, these positions us for profit growth in the fourth quarter. Stepping back, we recognize in the last quarters, we have faced challenges in service, which we are actively working to address. The execution of UpLift, while setting the foundation of a stronger and more efficient operating model, did cause some disruption in service execution in 2025. In addition, portfolio mix has been a headwind driven by geographic mix and a recent increase in cancellations. UpLift has been completed, and our new operating model is working and running stable. We have taken the decision to reinvest in the core of the business, and we recognize 2026 is a year of investment. This requires a cultural shift into service quality and customer centricity, impacting certain results. However, we strongly believe that the investments we are making today in service excellence are creating a strong foundation for the future. As a next step, we plan to systematically drive excellence across our 1,400 operating territories through our service operating model. In addition to the maintenance strategy, we are excited about the sustained growth in repair and modernization that is expected to continue. This and the new equipment business being back to growth in the second half with a growing backlog gives us confidence that we are well-positioned to sustain our industry-leading margins and capture growth for years to come. With that, I will kindly ask Krista to open the line for questions. Thank you. Operator: Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you'd like to withdraw that question, again, press star one. We do ask that you limit yourself to one question and one follow-up. For any additional questions, please re-queue. Your first question comes from Nigel Coe with Wolfe Research. Please go ahead. Nigel Coe: Oh, thanks. Good morning, everyone. Thanks for the details on the guide. I think you kind of made it clear that you've dialed back on the micro-pricing, but I wonder if you maybe just talk about some of the productivity headwinds that you're seeing that wasn't clear. Then Cristina, could you just lay out kind of how you see the service margin progression through the balance of the year? Cristina Mendez: Yeah. Thanks, Nigel. Listen, let me be clear what we're doing with the AI micro-pricing. First of all, we've seen tremendous success with it in our repair business. We see it flow through, we see it flow through rather quickly, because from the time we take an order, we typically execute that repair backlog in a period of short, low single-digit months, one or two months, then we see it flow through. We're very pleased with the ability to get price there. On the maintenance side, there's really two factors going on. One, which we've always known, is most of our maintenance contracts come up every few years. We don't have the opportunity to reprice them on an annual basis. When they come up, we're trying to drive for that. Trying to balance retention rates with additional micro-pricing is where we're trying to find that balance, Nigel, that says, in the maintenance contract, let's see what's appropriate. We understand where our costs are, the micro-pricing is giving us that detail by segmentation. We also don't want to drive additional potential customers who are on the fence because of our former service quality challenges that we're now investing in. We don't want that to be the tipping point for them. It's an account-by-account balance when we say we're kind of rebalancing that, more so than a wholesale change or a pullback. Nigel, I'm complementing to your two other questions about what happened with productivity and our expectation of service margin ramp-up in the second half. First, stepping back, we are very pleased with the service revenue take-up in the second quarter. This is in line or even above expectations. Also the investments we portrayed in the last quarter, we said $50 million this year, they are progressing exactly on plan. What we have observed in the second quarter on productivity is twofold. The one side, as we are investing, we see the cultural shift into quality and customer centricity that is creating some headwinds in productivity that we are actively addressing. The second component is temporary, that is related to the ramp-up of resources. Because we are increasing the number of mechanics that we are allocating into highly skilled activities, repair, and modernization, the onboarding time is longer because of the preparation required for those activities. Second is we have significantly accelerated execution of mods 24% in the quarter in order to deliver our customer commitments. This creates some headwinds in rate in order to have the resources available when and where needed. Now, looking into the second half of the year, we are very positive of our revenue growth. This is going to continue. We are expecting in service approximately 6% revenue growth in the second half of the year. The reason from 9% to 6% in the second half is because modernization will normalize to a low teens level. On the new equipment side, we are also going to continue growing. In fact, we expect positive growth in Q3, and the margins have stabilized. Looking at the margins in service, when you compare first half that are around 23.1% to the second half expected around mid-24%, this is a 150 basis point margin expansion in the second half. Based on 80 basis points from repair price, this is happening. We see that coming in the backlog. 50 basis points coming from modernization and repair volume, also happening. We have the orders in place, and we have the resources to execute. 30 basis points is the SG&A allocation into service. You may remember that we communicated $10 million restructuring in non-frontline related activities last quarter. This has been executed in the last two months, and we are now going to capture the benefit in the P&L. We have a little bit of headwinds from FX because of the mix of where the FX moves are coming from. This is assuming the productivity headwinds we have seen in Q2 will continue in the second half, which is an opportunity for us to address and to do better. Nigel Coe: Okay. I realize I asked a multi-part question there, maybe if I could just follow on. Before I do that, Cristina, I just want to say congratulations on the World Cup. Huge to Spain, obviously. Cristina Mendez: Thank you, Nigel. Nigel Coe: Then just on the retention, Judy, I think you mentioned improvement is taking longer to achieve. Just maybe kind of put a bow on that point. Why is it taking longer, and are you still confident by year-end you're going to make progress? Judy Marks: Yeah, we're absolutely going to make progress and continue. Nigel, you've always heard me say orders can be lumpy. Retention varies by quarter, which is why we try not to report it quarter-over-quarter, but we certainly watch it more frequently than that. What we're seeing is just we had some retention challenges, primarily in our portfolio in the Americas was down, not significantly, but down a little, and that's why we are investing in service excellence, and we're continuing to do that throughout 2026. Where we see we've made the investments, we're seeing the service quality improve. That hasn't instantaneously changed the retention rate. You're talking about a portfolio of 2.5 million units with the average customer having four units across the globe. We have a lot of customers, and we really need to drive the service operating model combined with service excellence and customer centricity, and all of that we really are convinced will show improved retention at year-end. We understand how important that is. We did see portfolio gains in EMEA. We did see significant portfolio gains in China in high single digits, and we did see it in Asia Pacific as well. We're comfortable that we have the trajectory to get there. We're also comfortable we've got the initiatives and the focus to get there. I can tell you, if you stop any Otis colleague, who I really need to thank, our 72,000 colleagues are working diligently every day, but so many of them are customer-facing. If I ask them, "What do you think is most important?" I think they're going to answer first, safety, because it's one of our absolutes, and the second thing they're going to say is satisfying our customers. That's the culture change that we want to ensure endures, and then we measure it through retention. Nigel Coe: Okay. Thanks, Judy. Operator: Your next question comes from the line of Jeff Sprague with Vertical Research. Please go ahead. Jeff Sprague: Hey, thanks. Good morning, everyone. Judy, I just wanted to come back to retention for a follow-up. Maybe just kind of get to the root cause. Sort of the nature of my question is we kind of had the retention disruption with kind of the UpLift program. There was some customer connectivity that wasn't clear until the program was executed, and it caused some disruption. I sort of thought that was behind us. Is it really you're seeing just more elasticity to price now as you're moving through this? I guess I'm not surprised retention is not going up quickly, but I'm a bit surprised that it's gone in reverse in at least a couple of places. Judy Marks: Yeah. Listen, Jeff, it's gone in reverse in a couple of places, but only by, if you look at the first half of the year, I'm not going to give you a number, but it's a small number of basis points. You know us to be transparent. We're always going to tell you whether it's up or down and share good news and bad news, but make sure we act on it. It's not pricing elasticity, it's not ISPs gaining share. It really is, if you think about a four-year contract in North America, we still have some residual flow through, regardless of the service excellence we're doing with some customers who are choosing to change based on multiple years. We are focused on addressing that through service excellence. I think the service operating model will address that in total across the enterprise. These lighthouse operating territories where we've done the service excellence, you've seen the 7% gain, and the clear majority of those have much higher retention rates that track with those service quality metrics. It's not what people naturally go to on price or on a different service offering from an ISP. Jeff Sprague: Understood. Just a comment. I think that was Christina. I think she said the shift to quality has negatively impacted productivity. Is that indicative of just the higher level of training, or what's really sort of the root of that? Judy Marks: Well, part of the root of it is, it's really interesting in our industry, and again, with two and a half million units, mainly Otis, but other non-Otis equipment. The equipment's aging. We see that obviously through the great upside we've seen in repair and modernization revenue, and that demand is going to continue. With that comes some more complex maintenance that has to happen on our comprehensive contracts. As we see that unfold, there's some labor involved in that, and we discuss that, but there's even more material involved for some of these contracts where we offer comprehensive service. We have seen inflation in repair parts. We've seen inflation in raw materials, but especially in repair and spare parts for the non-Otis equipment. We've seen pretty significant inflation, and we have our maintenance contracts for four years. That's what we need to offset, and we've seen that because of the quality focus. That's what we need to offset with productivity and eventually with price when that comes up for renewal. Jeff Sprague: Understood. Thank you very much. Judy Marks: You bet. Operator: Your next question comes from the line of Alexander Virgo with Evercore ISI. Please go ahead. Alexander Virgo: Thanks very much. Good morning, ladies. I wondered if you could just expand a little bit on this tempering of micro pricing point. I think Jeff was talking or alluding to the fact that maybe you've got a bit of price sensitivity, and it sounds like you've still got a bit of a hangover from the sort of legacy customer quality issues. I'm just wondering how much of this is a sort of a function of you trying to push the price up and discovering that actually these guys are going to walk away, so you're going to just temper that, and that's what tempering means. I wondered if you could talk a little bit about what you were expecting before versus what you expect now, because it feels like it's quite a big swing. If you could expand on that'd be super helpful. Just as a follow-up, on the service margins, Cristina, thank you for all of the detail on that. That's super helpful. I just wanted to clarify, ultimately, you talked about productivity headwinds remaining in the second half, despite all of the other things you talked about as a tailwind. As we roll into 2027, what should we be thinking about in terms of these productivity headwinds, the $50 million, as we look to 2027? Thank you. Cristina Mendez: Alex, thanks for the two questions. Let me address first the pricing question. First, clarifying that we are executing our usual price increase in maintenance stable as we have done before. This year, our goal was on top of the usual price increase, we wanted to add micro pricing that we knew in maintenance was going to take longer because of the time of the negotiation of the price adjustment and the time to penetrate the base. Repair is working exactly as we expected, and you may remember we said we're going to have $50 million incremental price impact this year. $35 million were from repair. This is in the outlook and is unchanged. It's the $15 million coming from maintenance that we are kind of balancing out with where we see the cancellation. The good thing of micro pricing is we can be very targeted. We are not increasing the same price to everyone. We are only tempering in those customers where we see the quality indicators are not there. We are not pushing those initiatives on top of the incremental price increase that we always have because of inflation. It's just the upside from micro pricing that is coming later because we are prioritizing retention. Moving to the service margin question and what it means for 2027. I want to reinforce the point that we are still very confident that our investment thesis on the fly will remain unchanged. We are a strong generator of profit and cash flow, and we are very encouraged by the revenue take-up. That's going to continue over time because we see an ongoing orders intake in repair and modernization of around loads to meet teams in the case of more higher than repair. While we have those orders, we are also building up the operational machine. We are ramping up resources in order to execute sustainably this ongoing growth in sales. While we ramp up the resources, and we also invest in the core of the maintenance business, we are seeing some short-term headwinds in our results because of the cost to ramp up. We are confident that we can address them because we have a great track record of addressing efficiency, productivity on the field, and that's what we are going to do going forward. Now looking into 2027, you can expect an ongoing revenue growth. New equipment is going to grow because we have a growing backlog, and we will see the growth happening in the second half of the year. We'll see service ongoing growth. On the profit side, new equipment margins should gradually get better. On the service side, you are going to see the ramp-up in the second half of the year. Service margins are going to expand. We will come back to you on due time on precise guidance for 2027. Judy Marks: Yeah, Alex, let me add just some color here and some commentary. As we were preparing for this, and Cristina said, and you think about the five years since spin, we do know how to manage productivity, operational effectiveness. We've shown that within multiple headwind scenarios, whether it was COVID or something else, or supply chain challenges. We know how to do that. I hope you all realize we recognized that we were going to see an increased demand signal in our markets, in the elevator and escalator markets, that's a little unprecedented for at least the past, let's just say, decade. We saw that the service business was going to ramp up due to the aging of equipment, and we knew we needed to prepare for that. That's a different type of muscle and culture and process to be able to simultaneously, globally handle the ramp-up of a service business, whether it's through our workforce, whether it's through tools and technologies. We started investing by hiring mechanics well over a few years ago. We brought on about 1,000 each year. We're continuing to do that. We've put training programs in place. The investments we've made in service excellence are for preparing for the future, but also reacting to our retention that went down at the end of 2024. I just want you to understand the ramp we're on, and why we're investing this year, and actually why we took the outlook down. I think it's important for everyone. As we look at 2025 in service on the top line, our maintenance for the year was up 2.5%, repair was up 5.3%, and mod was up 9.3%. This quarter alone, maintenance was up 3%, repair was up 12%, and stand out on mod on 24%. I don't believe it'll stay at that level. I think it'll come back, normalize a little into the teens. That was the ramp we knew was coming, and it's not a short-term ramp. It's not a few quarter ramp. This is a multiyear into the 2030s ramp as we see all this equipment aging. This was our time to prepare, and this is what we're doing with the service operating model. This is how we're getting ready. Like many other industries are getting ready for technology change and everything else, this is our industry's time, and this is how Otis decided to invest and to lead. We understand that bringing the outlook down is not ideal. While we're making these investments, we have seen increased costs in material, in labor, and we haven't been able to recover that fully in pricing. We understand that. These investments will prepare us not just for '26, but for '27 through 2030 and beyond, because the demand signal is there. I couldn't be more pleased with the top line and what we've been able to show. We have not had results like this previously. That is going to continue, plus or minus a point or two. That is going to continue as we go through the year and through the out years. Again, we'll share more outlook in '27. Alexander Virgo: Very helpful. Thank you very much. Operator: Your next question comes from the line of Varun Govindaraj with Bernstein. Please go ahead. Varun Govindaraj: Thank you. Morning, Judy, Cristina, Imelda. Quick question, just touching on the EPS number again. When we look at that $0.20 that you sort of cut for the back half of the year, obviously, you've talked a bit about that being the mix. Are there any investments sort of baked into that as well? I'm just trying to get a sense of how much of this is structural versus how much of this is temporary. I know we talked about it a little bit, but any clarity you can share on the numbers would be super helpful. Cristina Mendez: Yeah. Varun, on the investments, we communicated in Q1 $50 million investment, 5-0. This is included in the outlook and is progressing as we said. Out of the $50, we have invested $15 each quarter in Q1, Q2, so $30 million in the first half of the year, and we expect another $20 million in the second half of the year. Now, moving into the productivity headwinds, we are now anticipating another $50, 5-0, incremental to the previous outlook. $30 out of that is temporary because it relates to the ramp-up of resources and the higher rate in order to accelerate execution. $20 relates to what Judy mentioned before about inflation material that we are investing in order to drive quality up in our Service Excellence Program. We are going to address this productivity and incremental material cost with our Service Operating Model Program. Varun Govindaraj: Got it. Super helpful. Then quick follow-up in terms of hiring. How is that looking for the back half of the year? Do you sort of have the headcount that you're looking for? Are you still trying to pull talent? I know that this is a tough environment for technical talent more broadly, just given the amount of demand, how are you thinking about that? Judy Marks: The way we're thinking about it, I always try to remind people that we have a professional skill trade that is not something that moves to become electricians or welders or something. Our mechanics, they train, they are true professionals, and they stay in this industry for the majority of their careers. We're not competing with the buildup of data centers that's grabbing a lot of other skilled trades. As a matter of fact, our data center business, especially in the Americas, it has been up significantly. We're not competing with that, we are competing with all of the other challenges that with an aging population versus less availability of people who want to go into trades. We are focused on that. Our hiring is pretty geographically dispersed. It ranges from Asia Pacific markets, to EMEA markets, to the Americas. Obviously, China's at a stable point, many of our China field teams actually support us in the rest of the globe as we go through surges. They become field traveling teams. We're not concerned. We said we would think this year would end about where we've ended the last two years, around that plus 1,000. We're well on track for that. We're controlling voluntary attrition to the best of our ability with our mechanics, because that's the best place, is to retain mechanics. We obviously have mechanics who are retiring, but we have just as many mechanics in 0 to 5 years with us as we do in 30 years plus. We've got a nice distribution. We're not seeing a cliff with huge retirements, but we're balancing that in these 1,400 operating territories on a real-time basis. Obviously, as we bring new mechanics on, some are skilled. They're coming from other competitors and other companies. Others are brand new into the industry. That's the mix where we're trying to address the more complex repair and mod growth versus the skills required for maintenance. Varun Govindaraj: Understood. Appreciate the color. Thank you so much. Judy Marks: You bet. Thanks, Varun. Operator: Your next question comes from the line of Nicole DeBlase with Deutsche Bank. Please go ahead. Nicole DeBlase: Yeah, thanks. Good morning. Judy Marks: Morning. Nicole DeBlase: Just on the kind of bridge to get to what you guys had talked about for 3Q and 4Q. Cristina, is it possible to give some color around the exit rate on service margins? My math is kind of telling me that you have to exit around mid-20s to get back to profit growth in the fourth quarter. If you could confirm that, and then I guess if we could talk through some of the major bridging items that drive the improvement in service margins from Q2 to 4Q? Cristina Mendez: Yeah, sure, Nicole. First, some color on Q3 and Q4. On Q3, we expect service revenues to grow around 6%, which would be maintenance and repair around 5% and low teens in modernization. We expect margin rates to gradually ramp up. In Q3 will be around mid-24%. On the new equipment side, we will move into growth, and it will be around low single-digit growth in the quarter, and growth will be in line with the second quarter. Overall, as I said before in the script, is operating profit flat, although EPS will be down because of the calendarization of the tax initiatives in the year that are very back-loaded into Q4. Your maths were correct. In Q4, we expect operating profit growth on the back of ongoing growth in the equipment with more or less stable margins, ongoing growth in service revenues, also around 6%, but with another ramp-up in service growth. The ramp-up is essentially coming from repair price that is in the backlog. We see it's just a matter of executing this backlog. It's about the acceleration of modernization and repair volumes, also in the backlog. SG&A will be reduced, so the growth we have seen in the first half will be lower in the second half because we will see the flow-through of the restructuring actions activated in the last two months, and we have some headwinds on effects compared to the first half. That will end in around 25% margin by Q4. That will be for the full year, a touch below 24% for service growth. Nicole DeBlase: Okay, understood. That makes sense. Thanks, Cristina. I guess just kind of back on the price cost point, steel costs have continued to go up, alongside what's happening with your pricing and micro-pricing initiatives. How are you guys thinking about the impact of price cost in 2027? Is that when we start to see the impact of this steel inflation come through based on the timing of your steel purchases, and how confident are you that you can pass that through via price? Or is it possible that price cost could be a challenge in 2027? Judy Marks: Yeah, listen, we're not going to give you a guide to 2027, but I think it's important to understand that from a commodities perspective, we have locked in the majority almost, 98% of our commodities globally for the rest of this year. Where that impacts is not just on new equipment, but on mod. It's in both segments and/or sub-segment, if I may. Listen, we have the ability to price, and to have that flexibility as needed and have discussions with customers. We had that when the Middle East flared, and we needed to raise prices besides the normal price adjustments we get on service. 2027, we will continue to monitor. We'll lock in early for 2027 if it makes sense. We continuously review this, and we do this local for local. Remember, we manufacture local for local. While we may have global purchasing agreements, they do get implemented on a local basis at our 16 manufacturing facilities. We're going to continue to watch that. Our raw material costs typically are $600 million-$700 million a year. It's not a huge number for us because so much of our revenue and our profit especially, is in the service side. We know we have this year covered, and we're preparing already and evaluating 2027 with actions now. It's all about supply chain resilience. It's all about productivity and obviously getting material productivity from our suppliers. We've shown we know how to do this in the past, and you're going to see that again in 2027. Nicole DeBlase: Very clear. Thanks, Judy. I'll pass it on. Judy Marks: Thanks, Nicole. Operator: Your next question comes from the line of Lewis Merrick with BNP Paribas. Please go ahead. Lewis Merrick: Good morning. Thank you for taking my questions. If we could just go back quickly to the Q3 operating profit. You said that in Q3, operating profit should be flat sequentially. Just want to confirm that. Cristina Mendez: Lewis, I said flat versus the prior year. Lewis Merrick: Oh, okay. Fine. Then on the new equipment, during the quarter, it looks like you made a loss of market share based on the order intake. What in your view drove that? Was it pricing competition, a one-off issue, or something else? Judy Marks: Lewis, I don't think we lost market share in the quarter. Our backlog's actually up 4%. If you look at new equipment for us, standout performance in North America yet again for the eighth straight quarter, where their orders were up 15% again, after a strong 24% in the first quarter. I'm really thrilled to share that we are just honored. Most recently, we were announced our partnership and collaboration with Silverstein Properties and Turner Construction, where we secured 60 elevators and escalators at Two World Trade. China, new equipment is in line with us. As a matter of fact, everything China this quarter was as expected, whether it was the market or how Sally and the team performed, it was exactly as we expected in new equipment, and it's in line. As you see with our new equipment service, our least down in nine quarters, we really are starting to see that pick up. In Asia Pacific, we had two major projects in India and in Singapore last year, so it's a compare issue there, which is why the new equipment orders look down. I'm confident in new equipment. We compete with ISPs. They're not taking our share anywhere we can see. Again, we always knew we would get to a place in new equipment. It's taken us a while. It's taken the market a while to where we can have that ability to finally grow again and not have the headwind of new equipment. That's what you're going to see in the second half of the year with a 10% up in the Americas in the second quarter, and that continuing because we've had eight straight quarters of new equipment growth. Just one other comment on, and let me just correlate it to mod, in case you had the question there. Our backlog is up 26%, which is still a tremendous backlog, and we need to execute it. We need to convert it. We showed we could do that with 24% this quarter. No one's taken share from us in mod right now. Our China mod orders were up over 100%. Some of that due to the bond stimulus, but also due to a tremendous project called Tianjin 117, where we're going to supply over 250 elevators and escalators to the tallest current construction or modernization site in China. That's going to get converted as we go through the year. The compare is going to be tougher on the mod stimulus because it was more second-half loaded last year. You're going to see strong mod performance through the back of the year. Mod orders, we had a couple of tough compares. Second quarter last year had a great large commercial win in the U.S. and another large commercial win in Australia. It would've been double digits without it, but we don't report that way. I just want you to understand the bridge. Lewis Merrick: Yeah, that's helpful. Thank you very much. I'll pass it over. Judy Marks: Thanks, Lewis. Operator: That concludes our question and answer session. I will now turn the conference back over to Judy Marks for closing comments. Judy Marks: Thank you, Krista. In 2026, we are investing in capabilities to accelerate our top-line growth and profitability. Together with fundamental tailwinds of the aging installed base, Otis is well-positioned to deliver attractive, sustainable long-term shareholder value through our service business. Thank you all for joining us today. Please stay safe and well. Operator: Ladies and gentlemen, this does conclude today's conference call. Thank you for your participation, and you may now disconnect. 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This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability. The Motley Fool has positions in and recommends Otis Worldwide. The Motley Fool has a disclosure policy. Otis (OTIS) Q2 2026 Earnings Call Transcript was originally published by The Motley Fool

This article first appeared on GuruFocus. Net Sales: $3.9 billion with organic sales up 6%. Service Organic Sales Growth: 9%, with 24% growth in modernization and double-digit repair growth. New Equipment Orders: Down 5% in the quarter, but backlog increased 4% at constant currency. Adjusted Free Cash Flow: $290 million, up 19% year over year. Share Repurchases and Dividends: $800 million in share buybacks and a 5% dividend increase, returning over $1.1 billion to shareholders in the first half of 2026. Adjusted Operating Profit Margin: Declined 180 basis points to 15.2%. Adjusted EPS: Declined 4% or $0.04 in the quarter. Service Operating Profit: $599 million, with a margin of 23.2%, down 170 basis points year over year. New Equipment Organic Sales: Declined 1% in the quarter. New Equipment Operating Profit: $40 million, with a margin decline of 220 basis points to 3.1%. 2026 EPS Outlook: Adjusted EPS range of $4.01 to $4.05. Adjusted Free Cash Flow Outlook: Expected between $1.5 billion to $1.55 billion. Warning! GuruFocus has detected 8 Warning Signs with TRST. Is OTIS fairly valued? Test your thesis with our free DCF calculator. Release Date: July 22, 2026 For the complete transcript of the earnings call, please refer to the full earnings call transcript. Otis Worldwide Corp (NYSE:OTIS) achieved significant top-line growth with a 6% increase in organic sales, driven by strong service growth and improving trends in new equipment. The service segment saw a 9% organic sales growth, supported by 24% modernization growth and double-digit repair growth. The company delivered strong cash generation with an adjusted free cash flow of $290 million, up 19% year over year. Otis Worldwide Corp (NYSE:OTIS) returned over $1.1 billion to shareholders through share repurchases and dividends in the first half of 2026. The new equipment backlog increased by 4% at constant currency, providing good visibility into future sales and supporting confidence in new equipment stability. Service margins declined year over year due to labor and material cost increases, impacting profitability. Adjusted operating profit decreased by $32 million in the quarter, with a decline in adjusted operating profit margin by 180 basis points to 15.2%. Retention rates have been slower to improve than expected, impacting the company's ability to fully capitalize on micro-pricing initiatives. Productivity and cost headwinds were higher than anticipated, driven by strategic investments in service excellence and inflationary pressures. New equipment organic sales declined by 1% in the quarter, with challenges in market conditions, particularly in China and EMEA. Q: Can you elaborate on the productivity headwinds and the service margin progression for the rest of the year? A: Judith Marks, CEO, explained that the AI micro-pricing has been successful in the repair business, but maintenance contracts are more complex due to their multi-year nature. Cristina Mendez, CFO, added that service revenue growth is expected to continue, with a 6% growth anticipated in the second half. Service margins are expected to expand by 150 basis points in the second half, driven by repair pricing, modernization volume, and SG&A allocation improvements. Q: Why is retention improvement taking longer, and are you confident in progress by year-end? A: Judith Marks, CEO, acknowledged that retention varies by quarter and has been challenging, particularly in the Americas. However, investments in service excellence are expected to improve retention rates. Gains have been seen in EMEA and China, and the company is confident in achieving better retention by year-end. Q: What is causing the shift to quality to negatively impact productivity? A: Judith Marks, CEO, explained that the aging equipment requires more complex maintenance, leading to increased labor and material costs. The focus on service quality has led to short-term productivity headwinds, but the company is addressing these through operational improvements and pricing adjustments. Q: Can you provide more details on the tempering of micro-pricing and its impact? A: Cristina Mendez, CFO, clarified that the usual price increases are being executed, but additional micro-pricing in maintenance is being balanced with retention concerns. The repair segment is performing as expected, contributing $35 million to the outlook, while maintenance micro-pricing is being adjusted to prioritize retention. Q: How is the hiring situation for the second half of the year? A: Judith Marks, CEO, stated that the company is on track to hire around 1,000 mechanics this year, similar to previous years. The focus is on retaining skilled mechanics and balancing new hires to address complex repair and modernization needs. For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Interested in Otis Worldwide Corporation? Here are five stocks we like better. Otis reported 6% organic sales growth in Q2, led by a strong service business, with service organic sales up 9% and modernization sales up 24%. New equipment sales were nearly flat, showing signs of stabilization after several weaker quarters. Despite top-line growth, margins and profit declined as the company absorbed labor, material, productivity and investment costs. Adjusted operating margin fell to 15.2%, and Otis cut its full-year adjusted operating profit and EPS outlook. Otis is investing in service quality and retention, including a planned $50 million spend in 2026, while continuing to return cash to shareholders. The company raised its dividend, repurchased about $800 million of stock in the first half, and still expects strong free cash flow of $1.5 billion to $1.55 billion for the year. Why Otis Worldwide Stock Keeps Going Up Otis Worldwide (NYSE:OTIS) reported stronger second-quarter organic sales growth in 2026, driven by its service business, but lowered parts of its profit outlook as investments in service quality, retention initiatives and productivity pressures weighed on margins. Chair, CEO and President Judy Marks said the company delivered “a solid quarter with a significant step-up in organic sales growth,” citing accelerating service revenue, improving new equipment trends and strong cash generation. Net sales were $3.9 billion, with organic sales up 6%. → Buyback Boom: These 3 Companies Are Betting Billions on Their Own Stocks Why Investors Can Ride Otis Worldwide Stock for a Long Time Adjusted operating profit declined by $32 million in the quarter, excluding a $7 million foreign exchange tailwind, as higher volume and price were offset by inflation, mix and productivity impacts. Adjusted operating margin fell 180 basis points to 15.2%, while adjusted earnings per share declined 4%, or $0.04, due to operational performance, partially offset by favorable foreign exchange rates. Otis’ service segment remained the company’s main growth driver. Cristina Mendez, executive vice president and chief financial officer, said service organic sales rose 9% in the quarter, with growth across all lines of business and regions. → 3 Photonics Companies Making Quantum Tech Possible Maintenance and repair organic sales increased 6%, including 3% maintenance growth and 12% repair growth. Mendez said repair delivered its strongest performance in the past 10 quarters. Modernization organic sales increased 24%, which she described as the highest growth rate since Otis’ spin-off. Modernization orders rose 9% in the quarter, helped by significant growth in China and low-single-digit growth in EMEA and Asia Pacific, partly offset by a mid-single-digit decline in the Americas due to a difficult comparison with the prior year. Modernization backlog increased 26% year-over-year at constant currency. → AI Data Centers Need Power, and These 2 Industrials Are Cashing In Despite the revenue growth, service operating margin declined 170 basis points from a year earlier to 23.2%. Service operating profit rose $16 million at constant currency to $599 million, as higher volume and pricing more than offset labor costs, strategic investments, productivity headwinds, material costs and unfavorable mix. Marks said service margins were pressured by labor and material cost increases as Otis ramps operations to execute its repair and modernization backlog. She said the company expects margins to recover in coming quarters as service revenue growth continues. New equipment organic sales declined 1% in the quarter, which Mendez said was the lowest rate of decline in the past nine quarters. Growth in the Americas and Asia Pacific was more than offset by lower sales in China and EMEA. Americas new equipment sales increased 10%, supported by backlog conversion and orders growth from prior periods. Asia Pacific sales grew in the low single digits, driven by strength in Japan and India and partly offset by lower sales in Korea. EMEA sales declined 4%, primarily due to weakness in the Middle East and Southern Europe. China new equipment sales declined in the high teens, consistent with the backlog decline, though Mendez said the region showed slight sequential improvement. New equipment orders declined 5% year-over-year. Double-digit growth in the Americas and low-single-digit growth in EMEA were more than offset by declines in Asia Pacific, due to tough comparisons, and in China. New equipment backlog increased 4% year-over-year at constant currency, or 9% excluding China. New equipment operating profit declined $30 million at constant currency to $40 million, and margin fell 220 basis points to 3.1%. Mendez said the decline reflected lower volume, unfavorable price and mix. Otis said it is investing in service quality as part of a broader effort to improve customer retention and strengthen its operating model. Marks said the company previously outlined a plan to invest $50 million in service excellence and pricing during 2026. Otis invested $15 million in the second quarter and $30 million in the first half, with another $20 million expected in the second half. Marks said service quality metrics improved in territories targeted by the program, with the company’s service quality index up seven points in those operating territories. She said some territories also showed retention improvement, though overall retention excluding China was down in the quarter. Marks said the timing of retention benefits has shifted, prompting Otis to temper its AI micro-pricing implementation in maintenance. She said the company continues to see strong results from micro-pricing in repair, where pricing actions flow through more quickly because repair backlog is typically executed within one or two months. Mendez said Otis had expected $50 million of incremental price impact this year, including $35 million from repair and $15 million from maintenance. The repair portion remains in the outlook, while the maintenance micro-pricing upside is being balanced against retention concerns. Otis also cited productivity and cost headwinds. Mendez said the company now anticipates an additional $50 million impact versus its prior outlook, with $30 million related to temporary ramp-up costs for resources and higher labor rates to accelerate execution, and $20 million tied to material inflation and service quality investments. Otis maintained its 2026 sales outlook, continuing to expect net sales of $15.1 billion to $15.3 billion and organic sales growth in the low- to mid-single-digit range. Marks said the company still expects the global new equipment market to stabilize, with growth in all regions except China, and expects modernization to remain robust with double-digit growth across all regions. However, Mendez said Otis now expects adjusted operating profit to range from down $30 million to flat on an actual currency basis, and down $45 million to down $15 million at constant currency. The revised outlook reflects retention and tempered maintenance micro-pricing impacts, as well as productivity and cost headwinds. Adjusted free cash flow is now expected to be between $1.5 billion and $1.55 billion. Adjusted EPS is expected to be in a range of $4.01 to $4.05, reflecting the lower operating profit outlook and a $0.04 negative impact from foreign exchange. For the third quarter, Mendez said service organic sales are expected to remain strong at mid-single-digit growth, driven mainly by repair and modernization. New equipment organic sales are expected to continue improving sequentially. She said total adjusted operating profit is expected to be roughly flat year-over-year in the third quarter, while adjusted EPS is expected to decline at a level similar to the first half due to tax rate timing. Otis generated adjusted free cash flow of $290 million in the second quarter, up 19% from a year earlier. Marks said the company’s cash generation allows it to invest in growth and strategic investments, including the acquisition of a majority stake in WeMaintain, while returning capital to shareholders. In the first half of 2026, Otis repurchased approximately $800 million of shares and raised its dividend by 5%, returning more than $1.1 billion to shareholders. Marks said Otis remains confident in its strategy, pointing to revenue growth, improving service quality metrics and progress on operational initiatives. She said the company is working to standardize field and sales processes across its 1,400 operating territories through a service operating model aimed at improving frontline execution. “While the timing of retention benefits has shifted and we have observed headwinds in productivity and cost, we are as confident as ever in our strategy and our service flywheel,” Marks said. Otis Worldwide Corporation is a manufacturer, installer and servicer of vertical transportation systems, including elevators, escalators and moving walkways. The company designs and supplies new equipment for commercial, residential and industrial buildings, and provides ongoing maintenance and repair services aimed at maximizing equipment availability and safety. Otis also offers modernization solutions to upgrade aging systems and improve performance, accessibility and energy efficiency. In addition to new equipment sales, a significant portion of Otis's business derives from long-term service contracts and responsive maintenance work. This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected]. The article "Otis Worldwide Q2 Earnings Call Highlights" was originally published by MarketBeat. View MarketBeat's top stocks for July 2026.

Otis Worldwide Corporation OTIS reported mixed second-quarter 2026 results, wherein earnings beat the Zacks Consensus Estimate but declined year over year. Meanwhile, net sales surpassed the consensus mark and increased from the prior year's reported figure.Following the results, OTIS’ shares declined 1.9% during today's pre-market trading session, likely reflecting negative investor sentiment toward its reduced full-year adjusted EPS, adjusted operating profit and free cash flow guidance despite continued strength in the Service business.Otis' second-quarter performance reflected continued momentum in its Service business, driven by strong modernization and repair activity, accelerating maintenance trends and robust backlog growth. However, higher investments in Service initiatives and continued weakness in the New Equipment business weighed on profitability. OTIS reported adjusted earnings per share (EPS) of $1.01, beating the Zacks Consensus Estimate of $1.00 by 1%. In the year-ago quarter, it reported adjusted EPS of $1.05.Net sales of $3.86 billion surpassed the consensus mark of $3.72 billion by 3.7% and increased 7.3% from $3.60 billion reported in the year-ago quarter. Organic sales increased 6% year over year, led by continued strength in the Service segment. Modernization orders increased 9% at constant currency, while modernization backlog expanded 24% year over year, highlighting healthy demand across the business. Otis Worldwide Corporation price-consensus-eps-surprise-chart | Otis Worldwide Corporation Quote Adjusted operating margin contracted 180 basis points (bps) year over year to 15.2%, reflecting unfavorable segment performance and ongoing investments in strategic Service growth initiatives, partly offset by a favorable business mix. Service: Net sales from the segment increased 11% year over year to $2.58 billion. Organic sales rose 9%, driven by broad-based strength across maintenance, repair and modernization activities. Our model estimated organic sales for the segment to grow 5.4%.Organic maintenance and repair sales increased 6%, while organic modernization sales jumped 24% from the prior-year quarter. Segment operating profit increased to $599 million from $578 million a year ago. However, segment operating margin contracted 170 bps year over year to 23.2% as higher labor costs, ongoing investments in strategic Service initiatives, productivity headwinds, material costs and unfavorable mix more than offset higher volume and favorable pricing.New Equipment: Net sales from the segment were $1.28 billion, flat year over year. Organic sales decreased 1%, reflecting a high-teens decline in China and a mid-single-digit decline in EMEA, partly offset by approximately 10% organic growth in the Americas and low single-digit growth in Asia Pacific. Our model predicted organic sales for the New Equipment segment to decrease 3.3%.New Equipment orders declined 5% at constant currency, while backlog increased 3% at actual currency and 4% at constant currency.Segment operating profit declined to $40 million from $68 million in the year-ago quarter. Segment operating margin contracted 220 bps year over year to 3.1%, primarily due to lower volume, unfavorable pricing and adverse mix. Net cash provided by operating activities totaled $267 million during the second quarter compared with $215 million in the prior-year period.Free cash flow improved to $223 million from $179 million a year ago, while adjusted free cash flow increased to $290 million from $243 million. During the quarter, the company repurchased approximately $400 million of shares, underscoring its continued focus on returning capital to shareholders. Otis reaffirmed its 2026 net sales outlook of $15.1-$15.3 billion, implying approximately 4.6-6% year-over-year growth. Organic sales growth is also still expected in the low to mid-single-digit range.Organic New Equipment sales are now expected to range from down low single digits to flat, compared with the previous outlook of flat to low single digits. Organic Service sales guidance remained unchanged at mid to high-single-digit growth.The company lowered its adjusted operating profit outlook to approximately $2.4 billion from the previous expectation of approximately $2.5 billion. Adjusted EPS is now expected in the range of $4.01-$4.05, down from the prior outlook of $4.20-$4.24.Otis also reduced its adjusted free cash flow guidance to $1.50-$1.55 billion from the previous $1.60-$1.65 billion. Otis currently carries a Zacks Rank #4 (Sell).Here are some better-ranked stocks from the Industrial Products sector:CECO Environmental Corp. CECO sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.The company delivered a trailing four-quarter earnings surprise of 46.5%, on average. CECO stock has climbed 20% in the past six months. The Zacks Consensus Estimate for CECO Environmental’s 2026 sales and EPS indicates growth of 66.4% and 121.4%, respectively, from the prior-year levels.W.W. Grainger, Inc. GWW holds a Zacks Rank of #2 (Buy) at present. The company delivered a trailing four-quarter earnings surprise of 4.2%, on average. GWW stock has gained 28.7% in the past six months.The Zacks Consensus Estimate for W.W. Grainger’s 2026 sales and EPS indicates growth of 8.2% and 15.2%, respectively, from the prior-year levels.Applied Industrial Technologies, Inc. AIT presently carries a Zacks Rank 2. The company delivered a trailing four-quarter earnings surprise of 4%, on average. AIT stock has jumped 21.8% in the past six months.The Zacks Consensus Estimate for Applied Industrial Technologies’ fiscal 2026 sales and EPS indicates growth of 7.5% and 5.8%, respectively, from the year-ago period’s levels. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Otis Worldwide Corporation (OTIS) : Free Stock Analysis Report W.W. Grainger, Inc. (GWW) : Free Stock Analysis Report Applied Industrial Technologies, Inc. (AIT) : Free Stock Analysis Report CECO Environmental Corp. (CECO) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Otis Worldwide (OTIS) came out with quarterly earnings of $1.01 per share, beating the Zacks Consensus Estimate of $1 per share. This compares to earnings of $1.05 per share a year ago. These figures are adjusted for non-recurring items. This quarterly report represents an earnings surprise of +1.00%. A quarter ago, it was expected that this company would post earnings of $0.91 per share when it actually produced earnings of $0.89, delivering a surprise of -2.2%. Over the last four quarters, the company has surpassed consensus EPS estimates two times. Otis Worldwide, which belongs to the Zacks Manufacturing - General Industrial industry, posted revenues of $3.86 billion for the quarter ended June 2026, surpassing the Zacks Consensus Estimate by 3.71%. This compares to year-ago revenues of $3.6 billion. The company has topped consensus revenue estimates three times over the last four quarters. The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call. Otis Worldwide shares have lost about 17.6% since the beginning of the year versus the S&P 500's gain of 9.7%. While Otis Worldwide has underperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock? There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately. Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions. Ahead of this earnings release, the estimate revisions trend for Otis Worldwide was unfavorable. While the magnitude and direction of estimate revisions could change following the company's just-released earnings report, the current status translates into a Zacks Rank #4 (Sell) for the stock. So, the shares are expected to underperform the market in the near future. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. It will be interesting to see how estimates for the coming quarters and the current fiscal year change in the days ahead. The current consensus EPS estimate is $1.09 on $3.82 billion in revenues for the coming quarter and $4.16 on $15.06 billion in revenues for the current fiscal year. Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Manufacturing - General Industrial is currently in the top 26% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1. Xometry (XMTR), another stock in the same industry, has yet to report results for the quarter ended June 2026. The results are expected to be released on August 4. This marketplace for on-demand manufacturing is expected to post quarterly earnings of $0.36 per share in its upcoming report, which represents a year-over-year change of +300%. The consensus EPS estimate for the quarter has been revised 350% higher over the last 30 days to the current level. Xometry's revenues are expected to be $215.54 million, up 32.6% from the year-ago quarter. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Otis Worldwide Corporation (OTIS) : Free Stock Analysis Report Xometry, Inc. (XMTR) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research