Wolfe Research reiterates Otis Worldwide stock rating on merger talk

Investing.com - Wolfe Research reiterated an Outperform rating and $100.00 price target on Otis Worldwide Corp (NYSE:OTIS) following media reports that KONE is in negotiations to acquire rival TK Elevator for a reported valuation of €25 billion. Otis shares currently trade at $83.61, near their 52-week low of $82.47, down roughly 15% over the past year amid industry uncertainty.

The combined KONE and TK Elevator entity would generate revenues of approximately $24 billion, while Otis would become a distant second player in the market with revenues of around $15 billion—closely matching the company’s $14.43 billion in trailing twelve-month revenue. Otis would potentially lose manufacturing and field service scale advantages on a relative basis. Despite this potential shift, InvestingPro data suggests the stock is currently undervalued relative to its Fair Value, presenting a potential opportunity for investors.

Wolfe Research does not view the scale difference as a competitive disadvantage, noting that the approximately 50% independent service provider share of the global service business represents the largest competitive threat, which remains unaffected by the merger. The firm expects a combined KONE and TK Elevator would be unlikely to pursue aggressive market share ambitions due to the debt burden from the transaction.

The research firm does not expect Otis to submit a counter-bid, citing higher antitrust hurdles and the potential need to issue equity at the current stock price, which would be dilutive. KONE maintains a debt-free balance sheet and holds a 20% share in Toshiba Elevator that could be divested.

Wolfe Research prefers Otis to remain focused on executing its plan and potentially benefit from service portfolios that might become available as part of any transaction. The firm views industry consolidation from four major global players to three as a small positive for industry structure. For deeper insights into Otis’s competitive positioning and financial health, investors can access the comprehensive Pro Research Report, available for this and 1,400+ other US equities.

In other recent news, Otis Worldwide Corporation reported its fourth-quarter 2025 earnings, which fell short of analyst expectations. The company posted an earnings per share (EPS) of $1.03, slightly below the forecasted $1.04. Revenue also did not meet projections, coming in at $3.8 billion compared to the anticipated $3.89 billion. Despite these results, Otis is projecting mid to high single-digit EPS growth for 2026. Additionally, Otis announced the launch of two elevator modernization packages for low- to mid-rise residential and commercial buildings in North America. These packages, named Arise MOD Prime and Arise MOD Plus, aim to upgrade aging elevators, with over 1 million units in the U.S. and Canada being at least 20 years old. These recent developments highlight Otis’s focus on innovation and service growth.

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