A Late-Cycle, Service-Driven Story Is Driving Otis Worldwide Higher

It’s been a while since I’ve written on Otis Worldwide (NYSE:OTIS), and the shares have outperformed my expectations since then, climbing about 15% and outperforming the broader industrial space by about 10%. Relative to other companies with significant non-residential exposure, Otis has outperformed Allegion (ALLE), KONE (OTCPK:KNYJY), while Johnson Controls (JCI) has kept pace, and late-cycle companies have in general been holding up better as investors increasingly worry about short-cycle trends next year.

I understand the appeal of the Otis story – not only are key markets like multifamily housing likely to be stronger than most in 2023, but the company has a multiyear service growth story that is supported by strong execution in recent years. Valuation already reflects a lot of the positives, though, and I do see a weaker non-residential construction environment as a modest potential negative.

 

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A Late-Cycle, Service-Driven Story Is Driving Otis Worldwide Higher