- Price
- $68.45 → $65.94(−3.7%)
- Discount
- 34.8% → 37.2%(+2.4 pts)
- Thesis
- Otis trades around $68.45, about 35% below its $105 fair value estimate, and near its 52-week low after falling more than 20% so far in 2026. The market is worried aboutpricing in two thingsworries about Otis: labor and training costs squeezing Service margins, and a shrinking New Equipment market in China that keeps shrinking, and margin pressure in the core Service business, where. Otis already cut its 2026 profit guidance once, in July because labor, materials, andafter new-mechanic training costs came inran higher than planned. Adding to theInvestor uncertainty, Otis announced on September 15, 2026 that grew further when CEO Judy Marks announced her retirement in September 2026, who has run the company since its 2020 spin-off from United Technologies, will retire once a successor is found, with the search expectedno successor named yet. The gap can close if margin pressure eases as recently hired mechanics finish training. Later quarters should start to conclude by mid-2027show this. But the underlying growth engine still looks intact:It also needs modernization sales, which replace and upgrade elevators nearing the end of their working life, grewup 24% organically in the second quarter of 2026, and the modernization order backlog is upwith a 26% at constant currencyhigher backlog, a multi-year tailwind that does not depend onto keep converting into revenue regardless of what China's new-equipment cyclemarket does. A smooth, well-communicated CEO transition would remove a second source of uncertainty. Otis also keeps growing its maintenance portfolio and returning cashis expected to shareholders, raising its dividend 5% in Aprilreport third-quarter 2026 and buying back roughly $800 million of stock inresults around late October 2026, the first halfnext test of whether margins are stabilizing. The CEO search is expected to conclude by mid-2027, at the yearlatest by July 31, 2027. If margin pressure eases as newly hired mechanics finish trainingmargins stabilize and the leadership transition goes smoothlya strong successor is named within that window, the market's discount to fair value can narrow. The honest counter-case: management has already hadclose over the next three to cut its 2026 profit forecast once, so a further stumble infive quarters. If China, keeps shrinking or another guidance cut follows, or a rocky CEO search could keep the stock could stay cheap for a while longerwell into 2027.