Yahoo Finance Executive Editor Brian Sozzi is joined by Otis Worldwide (OTIS) CEO Judy Marks on the floor of the New York Stock Exchange to discuss the escalator and elevator operator's full-year guidance and expected sales growth, as well as Otis' position amid US inflation and Marks' own journey as an executive leader.
"We still see healthy project flow. We came into the year with a new equipment backlog up 2% and a modernization backlog for refurbishment up almost 15%. A lot of that is happening here in North America," Marks says. "We've got the backlog that gives us that line of sight for our 2024 guide that lets us know what our revenue's going to be globally, not just here in the US."
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Editor's note: This article was written by Luke Carberry Mogan.
Video Transcript
[AUDIO LOGO]
BRIAN SOZZI: Welcome back to "Yahoo Finance Live." I'm Brian Sozzi down at the New York Stock Exchange. And a pretty big investor day for elevator escalator giant, Otis Worldwide. Let's get to Otis Chair and CEO Judy Marks. Judy, good to see you in person for a change.
JUDY MARKS: Great to see you, Brian. It's great to be here.
BRIAN SOZZI: So we were talking off-camera a little bit. This is a market obsessed with seven tech stocks that, I don't know, investors, I think, are forgetting that there's other companies out there who invest in companies like yours that are generating a lot of cash. Pardon the pun, give us the 15-second elevator pitch on Otis.
JUDY MARKS: Oh, it's a great resilient service business. 2.3 billion people a day touch our product. And we service 2.3 million elevators. It lets us drive service revenues. And what we shared today in our medium term guide, we're looking at $8 billion of cash generation between '24 and '28, which will return to our shareholders and sustained growth EPS keger of double digit.
BRIAN SOZZI: Are investors still thinking of you as they must sell more elevators and if they don't, maybe they don't make a quarter? But should they actually be thinking of you as maintaining all of these elevators and escalators and then building and service into this business and collecting fees from it?
JUDY MARKS: Yeah. So our business model is simple and elegant. It's all about service. And we actually innovate and invent and manufacture elevators and install them so that we can get the service for 5, 10, 20, 100 years in some cases. This is all a service story. 60% of our revenue last year was service. $14.2 billion total revenue top line. 90% of our profits were in service. Of our 2.3 billion, about 2 billion were service.
We still make money on the new equipment, but it's all about the service and keeping the world moving.
BRIAN SOZZI: The economy under President Biden is showing signs of improvement. Inflation is slowing. There are clearer, I think, signs of improvement in the economy. It's getting panned. It's not getting noticed that I think to the extent a lot of people would expect. How do you see from your standpoint? A lot of money has been thrown into the industrial economy in here. Do you see it in your project flow?
JUDY MARKS: So we still see healthy project flow. We came into the year with a new equipment backlog up 2% and a modernization backlog for refurbishment up almost 15%. And a lot of that's happening here in North America. We've got the backlog that gives us that line of sight for our '24 guide that lets us know what our revenue is going to be globally, not just here in the US.
But in the US, infrastructure, it's going to be strong just like it is everywhere else in the world, whether that's metros, airports, rail. And we've got a big play there.
BRIAN SOZZI: Compare to-- compare the US to China, what is the China economic outlook look like? There has been concern about the slowdown over there.
JUDY MARKS: So on the property side, the real estate side, absolutely we were projecting this will be the third year of a down market in China. And for our medium term guide, we're saying China is going to be down for the medium term for the new equipment for building. On the service side, 8 million units are in service in China. It's a service play there. And we've doubled our service portfolio in the last four years, grew it 20% last year alone.
BRIAN SOZZI: What-- and then in terms of Europe, I think that has been a pretty just a better story, right?
JUDY MARKS: Yeah. Southern Europe's really still doing very well. Northern Europe, Germany, France, a little more challenged. But again, everyone needs mandated code-driven service. And that's where we excel.
BRIAN SOZZI: Judy, you have quite the story. You've been industrial-- in the industrial sector pretty much your whole career. I mean, tell investors a little bit about yourself because it was only recently that your business got spun off of another business, what, four years ago.
JUDY MARKS: Yeah. It feels like a lot longer with all the headwinds we had. But I couldn't be more proud of our team of 71,000 colleagues. I'm an engineer by background, but I've spent my entire career in industrials. And now to be able to lead such an iconic 170-year-old company into its future and to have the returns we have and to serve the customers, to have the customers we have that trust us and the passengers throughout the world that trust us, there's no better mission.
BRIAN SOZZI: I think you've perhaps sold a lot of people that there is more stocks to invest in than seven tech stocks. Judy Marks, always good to see you, Otis Chair and CEO.
JUDY MARKS: Thanks, Brian.