Why did adjusted EPS decline even though net sales grew 6%?

Management attributed the 3% decline in adjusted EPS to operational performance, higher interest, and higher taxes, partially offset by favorable foreign exchange rates and a lower share count. Adjusted operating profit fell $10 million at actual currency and $38 million at constant currency, driven by declines in both segments, including higher labor and material costs, Service investments, and tariff impacts.

Why did GAAP EPS rise 43% while adjusted EPS fell?

The GAAP comparison benefited from prior-year charges, including UpLift transformation costs, separation-related adjustments, and other non-recurring items. Those items were excluded from adjusted results, so they did not affect the adjusted comparison in the same way.

How is the Service business performing, and what pressures are affecting its margin?

Service net sales rose 11% to $2,417 million, with organic sales up 5% and repair up 16%. Segment operating profit rose $19 million at actual currency but fell $10 million at constant currency, and segment margin contracted 160 basis points to 23.0%, reflecting higher labor and material costs and investments, partially offset by higher volume and favorable pricing.

What is the status of the German tax litigation refunds and how do they affect cash flow?

The company has started to receive refunds related to the favorable August 2024 German tax litigation ruling and anticipates the refund process will continue through 2026. Adjusted free cash flow excludes $126 million of these refunds, so reported free cash flow of $380 million differs from adjusted free cash flow of $272 million.

OTIS 8-K: Earnings & Results

Q: What does the revised 2026 outlook imply for the company?

Otis now expects net sales of $15.1 to $15.3 billion, organic sales growth in the low to mid-single digits, adjusted operating profit of approximately $2.5 billion, adjusted EPS of $4.20 to $4.24, and adjusted free cash flow of $1.60 to $1.65 billion. The filing does not state the prior outlook figures for comparison.

01—Abstract

Summary

Summary of the 8-K filed April 22, 2026. Cited figures are marked; the original filing is the authoritative source.

Otis Worldwide Corporation (NYSE: OTIS) reported first quarter 2026 results in a press release dated April 22, 2026, furnished as Exhibit 99 to this Form 8-K.

Net sales were $3,566 million^a, up 6% from $3,350 million a year earlier, with organic sales up 1%. Service net sales rose 11% to $2,417 million, led by repair, which grew 16% at actual currency and approximately 10% organically. New Equipment net sales declined 1% to $1,149 million, with a greater than 20% decline in China, and New Equipment segment operating profit fell to $38 million from $66 million.

GAAP operating profit rose to $539 million^b from $411 million, and GAAP diluted EPS increased 43% to $0.87. Adjusted operating profit decreased $10 million to $550 million, and adjusted EPS decreased 3% to $0.89, which management attributed to operational performance, higher interest, and higher taxes. The company cited tariff impacts, Service investments, and shipment delays tied to the Middle East situation as pressures on margins.

Cash flow from operations was $413 million^c and adjusted free cash flow was $272 million, compared with $190 million and $186 million a year earlier. The company repurchased approximately $400 million of shares during the quarter. Modernization orders rose 11% at constant currency and modernization backlog rose 32% (30% at constant currency), while New Equipment orders rose 1% at constant currency.

Management also announced a majority investment in WeMaintain, a digitally native, AI-enabled elevator service provider. Otis revised its full-year 2026 outlook to net sales of $15.1 to $15.3 billion^d, organic sales up low to mid-single digits, adjusted operating profit of approximately $2.5 billion, adjusted EPS of $4.20 to $4.24, and adjusted free cash flow of $1.60 to $1.65 billion. Management expressed confidence in growing momentum into the second quarter and the remainder of the year, citing backlog growth, pricing actions, and execution.

02—Key points

Key Highlights

Net sales of $3,566 million, up 6% year over year; organic sales up 1%.
Service net sales up 11% to $2,417 million, with organic sales up 5%; repair net sales up 16% with organic sales up approximately 10%.
New Equipment net sales down 1% to $1,149 million; segment operating profit fell to $38 million from $66 million, with segment margin of 3.3%.
GAAP diluted EPS of $0.87, up 43%; adjusted EPS of $0.89, down 3%.
Operating cash flow of $413 million and adjusted free cash flow of $272 million; share repurchases of approximately $400 million.
Modernization orders up 11% at constant currency; modernization backlog up 32% (30% at constant currency); New Equipment backlog up 6% (3% at constant currency).
Full-year 2026 outlook revised: net sales of $15.1 to $15.3 billion, adjusted operating profit of approximately $2.5 billion, adjusted EPS of $4.20 to $4.24, and adjusted free cash flow of $1.60 to $1.65 billion.

03—Questions

Frequently Asked Questions

Why did adjusted EPS decline even though net sales grew 6%?
Management attributed the 3% decline in adjusted EPS to operational performance, higher interest, and higher taxes, partially offset by favorable foreign exchange rates and a lower share count. Adjusted operating profit fell $10 million at actual currency and $38 million at constant currency, driven by declines in both segments, including higher labor and material costs, Service investments, and tariff impacts.
Why did GAAP EPS rise 43% while adjusted EPS fell?
The GAAP comparison benefited from prior-year charges, including UpLift transformation costs, separation-related adjustments, and other non-recurring items. Those items were excluded from adjusted results, so they did not affect the adjusted comparison in the same way.
How is the Service business performing, and what pressures are affecting its margin?
Service net sales rose 11% to $2,417 million, with organic sales up 5% and repair up 16%. Segment operating profit rose $19 million at actual currency but fell $10 million at constant currency, and segment margin contracted 160 basis points to 23.0%, reflecting higher labor and material costs and investments, partially offset by higher volume and favorable pricing.
What does the revised 2026 outlook imply for the company?
Otis now expects net sales of $15.1 to $15.3 billion, organic sales growth in the low to mid-single digits, adjusted operating profit of approximately $2.5 billion, adjusted EPS of $4.20 to $4.24, and adjusted free cash flow of $1.60 to $1.65 billion. The filing does not state the prior outlook figures for comparison.
What is the status of the German tax litigation refunds and how do they affect cash flow?
The company has started to receive refunds related to the favorable August 2024 German tax litigation ruling and anticipates the refund process will continue through 2026. Adjusted free cash flow excludes $126 million of these refunds, so reported free cash flow of $380 million differs from adjusted free cash flow of $272 million.

04—Continue

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