By Dhirendra Tripathi
Investing.com – Otis stock (NYSE:OTIS) slipped 5.6% in Monday’s premarket trading after the company gave disappointing guidance for the coming year, overshadowed by weakness in the key Chinese real estate market.
The elevator manufacturer said organic sales will grow only 2.5%-4.5% this year, thanks to the slowdown in the world's second-largest economy, where an ongoing debt crisis is holding back fresh investment by developers of high-rise office and residential space.
Business from China comprised a fifth of its 2021 net sales. Otis said it is taking steps to contain any fallout due to its exposure to troubled developers, including requiring them to make cash pre-payments. It said around 10 customers had breached “2 or 3 red lines” which would amount to less than 0.5% of its total sales.
Net sales for the year are seen at $14.55 billion at the midpoint of its guidance range, up only 2%. They grew 12% in the year through December. Profit per share for the year is expected to be a tad higher at $3.25 center of its guidance range compared to $3.01 in 2021.
Otis' fourth-quarter sales already slowed to a mere 2% rise to $1.6 billion, while organic sales rose only 1.2%. The company attributed this to tougher comparisons in the Americas, and the Europe, Middle East and Africa regions, as business recovered from the impact of Covid-19 in the same period a year ago.
Fourth-quarter new equipment orders were up 7.3% while order backlogs rose 1%.