OTIS

Otis is the global leader in elevators and escalators, and the investment case rests on its Service segment — maintenance, repair and modernization on a vast installed base, with the model deliberately converting new installs into recurring service contracts. That gives the business an annuity-like quality that shows up in the numbers: FY2025 revenue grew +1.2% to $14.4B and, more importantly, operating income rose +6.2% to $2.13B with a 14.8% operating margin, helped by the UpLift program now delivering ~$200M of annual run-rate savings. Operating cash flow of $1.60B (+2.1%) funded $809M of buybacks and $647M of dividends, and shares outstanding fell -2.0% — this is a steady cash compounder, not a grower.

The headline -15.9% drop in net income (to $1.38B) and -14.0% EPS decline (to $3.50) look alarming but are largely an optics artifact: FY2024 was inflated by a favorable German tax litigation ruling (~$185M income-tax benefit plus ~$200M interest income), while FY2025 instead carries indemnification expense tied to that same matter under the RTX Tax Matters Agreement. Normalizing for those one-offs, underlying earnings power is far steadier than the YoY line suggests, consistent with the rising operating income. The negative stockholders' equity of -$5.39B and L/E of -2.95x make ROE (-25.7%) and the balance-sheet ratios uninformative — this is the legacy of the RTX spinoff capital structure and aggressive buybacks, not financial distress; net long-term debt is manageable against $1.6B of operating cash flow.