Otis Worldwide Corporation (OTIS): A Bull Case Theory

We came across a bullish thesis on Otis Worldwide Corporation on Bob’s Payment Stock’s Substack by Bob Hammel. In this article, we will summarize the bulls’ thesis on OTIS. Otis Worldwide Corporation’s share was trading at $100.34 as of July 16^th. OTIS’s trailing and forward P/E were 26.27 and 24.69, respectively according to Yahoo Finance.

Otis Worldwide is positioned as a durable compounder in the vertical transportation market, with a business model anchored in its highly profitable and recurring service operations. While new equipment accounts for around 40% of revenue, nearly 90% of profit stems from its 2.4 million-unit service portfolio, the largest in the industry, yet only 11% of the global installed base.

The core investment case is built on consistent high-single-digit EPS growth, underpinned by 3.5–4.5% service portfolio growth, modest pricing gains, incremental margin expansion, and continued share repurchases reducing the share count by 2% annually. The upside lies in accelerating modernization sales in China’s aging installed base, which Otis aims to convert into high-margin service contracts.

Recent initiatives, including the transformation of its Chinese operations and the UpLift program, signal a shift in focus toward service portfolio expansion. While the valuation at 23x NTM EPS ($94.40 entry price) appears fair, the clean, asset-light model and 10% FCF yield on repurchased shares offer downside protection. Otis’ capital allocation has been disciplined, returning over $6.1B to shareholders since 2020 and maintaining a 99% FCF-to-net-income conversion.

Despite near-term restructuring costs in 2025, longer-term efficiency gains are expected to drive margin expansion. Otis competes with a few global OEMs in new equipment but has a wider competitive moat in services, where independents dominate unit share but not value. With a robust global footprint, minimal customer concentration, and limited tech disruption risk, Otis offers investors a rare mix of stability, growth, and capital return potential, making it an ideal long-term compounder.

Previously we covered a bullish thesis on Otis Worldwide Corporation by Brass Tacks Cap in October 2024, which highlighted the company’s dominant service network, high customer retention, and long-term growth potential in emerging markets. The company’s stock price has depreciated approximately 2.9% since our coverage. The thesis still stands as Otis’s resilient service model continues to underpin steady profitability. Bob Hammel shares a similar view but emphasizes margin expansion, capital returns, and China modernization as key upside drivers.

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Disclosure: None.