Why Otis isn't focused on building new elevators
Otis, the world's largest elevator company, invests heavily in testing and maintenance rather than new elevator development. Since spinning off from United Technologies in 2020, Otis has grown sales by 13% and now services 2.5 million elevators annually, though its stock has underperformed the industrial sector recently.
Summary
Otis operates an extensive testing facility in Bristol, Connecticut to ensure its elevators withstand extreme environmental conditions including salt fog, humidity, temperature fluctuations, and sandstorms. The company maintains a massive installed base of elevators across iconic structures worldwide such as the Space Needle, Eiffel Tower, Burj Khalifa, and Empire State Building, with one machine dating back to 1931. Following its 2020 spinoff from United Technologies (when aerospace operations merged with Raytheon to form RTX), Otis has achieved 13% sales growth and expanded its servicing operations from over 2 million units to 2.5 million elevators per year. Despite this operational growth, the company's stock price has declined over the past year while the broader industrial sector has appreciated, suggesting investor concerns about future growth prospects and profitability.
About this episode
Elevator giant Otis makes most of its profits from servicing elevators, not building new ones. The business hinges on long-term stability, but its stock has fallen over the past year due to setbacks in its service business and investors chasing the AI trade. CNBC's Ryan Baker has the details. Find the full report in related video.
Key Insights
- Otis operates sophisticated testing facilities that simulate extreme environmental conditions like salt fog, humidity, sandstorms, and temperature variations to ensure elevators function reliably across diverse real-world deployment scenarios
- Since spinning off from United Technologies in 2020, Otis has grown sales by 13% and increased its annual servicing capacity from 2 million to 2.5 million elevators, indicating a strategic focus on maintenance and service revenue rather than new equipment sales
- Despite operational growth metrics and expanded servicing operations, Otis's stock has underperformed the industrial sector over the past year, signaling investor concerns about the company's competitiveness and future profitability
Topics
Transcript
[0:01] So, this is the salt fog machine, right? >> There's humidity, salt, temperature, rusting. The elevator has to operate under all of those conditions. >> In the middle of Bristol, Connecticut, in a 28-story building, Otis, the largest elevator company in the world, tests its elevators. >> This is a dust chamber. We have sandstorms and those kinds of things coming in, and we want to make sure that system operates under those conditions as well. Otis has elevators installed in buildings all across the world. Some of the most famous include the Space Needle, the Eiffel [music] Tower, the [0:33] Marsh Khalifa, and of course, the Empire State Building. This right here is the machine that was first…
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