Otis Worldwide Corp.

Most of Otis' service contracts outside of Asia are several years long. As a result, its scheduled maintenance business is much less cyclical than capital equipment manufacturing. Although service revenue did fall 6% year over year (YoY) in the second quarter of 2020 as buildings closed around the world and unscheduled repair work decreased, service segment revenue fell only 1% during the full year and rebounded 7% in 2021. The stable outlook reflects our expectation that Otis' good revenue visibility and free cash flow generation for at least the next one or two years will offset any potential slow-down in construction activity and keep leverage below 3x. We could lower our rating on Otis if we believe leverage will increase

...Stable, profitable service segment will continue to support Otis' operating performance. We expect service segment revenue and margin will remain generally stable for Otis Worldwide Corp. Elevators and escalators require regular maintenance to function appropriately and are subject to stringent safety regulations. The risk to building owners of fines for violating building code regulations and of being unable to easily access higher floors keeps service margins high. Although service represents only 55% of 2021 revenue, the segment accounts for 79% of 2021 operating profit before general corporate and other expenses....

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