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Elevator maker Otis Worldwide beats on earnings, misses on revenue

Yahoo Finance Live's Julie Hyman and Brian Sozzi discuss first quarter earnings for elevator maker Otis Worldwide.

Video transcript

JULIE HYMAN: Finally, elevators.

BRIAN SOZZI: You're just doing this for me. You know I like elevators.

JULIE HYMAN: No, I like elevators, too. Otis Worldwide came out with its numbers. Elevators are important because they give us a barometer in part as to what's happening in office buildings, right? Which, as we talked about last week with the real estate investor, office buildings are still having some trouble here. If you're in an office building right now, you probably know it's not as full as it used to be. So how did that play out? Because I know you got a chance to talk to [INAUDIBLE].

BRIAN SOZZI: Yeah, I caught up with CEO Judy Marks, and she took a cautious stance. Really, one of the first executives that I've talked to this earnings season to take a cautious stance in the second quarter. Highlighted to me some concern around business in China because of COVID related lockdowns, maybe potentially as well getting some components for elevators coming from China.

But look, this quarter on its own was pretty good here. New equipment orders up 8.8%. That was good. Organic sales up 3.1%. And another executive, Julie-- I asked Judy, have you seen any signs of peak inflation? Not the case. In fact, I believe for this year, they are now looking for $110 million inflationary hit. They were at $90 million. So the view of peak inflation in the market, here's another company saying that is completely misguided.

JULIE HYMAN: That is pretty fascinating, right? And we're seeing it across such a broad swath of companies. I mean, elevators and Coca-Cola, you can't really think of two more different businesses, and yet, we're getting a similar message from these two different businesses. What about that idea about office buildings and whether there's enough there to support servicing of elevators and such?

BRIAN SOZZI: That's your first instinct, and it has been mine historically, too, looking at new residential buildings and trends and in the housing market and try to read through what it might mean to a company like Otis. But a large part of the business now, Julie, is actually service oriented. So they have that recurring revenue stream of, just, you have to service these elevators. Some of them are, in fact, decades old. And you have to pay someone to make sure these things run.

JULIE HYMAN: Yeah, you have to-- there's not really a choice.

BRIAN SOZZI: The alternative is, we all get stuck in the elevator.

JULIE HYMAN: Yes.

BRIAN SOZZI: Yeah.

JULIE HYMAN: Which is not a good alternative. All right.