Schindler Earnings: Modernization Orders Retain Buoyancy, Offsetting Still Weak New Installations

Wide-moat Schindler Holding delivered a resilient second-quarter result featuring largely flat constant-currency new order intake year on year, with strong modernization and aftermarket service orders offsetting still weak demand for new elevator equipment installations. The continued buoyancy of modernization orders highlights the much-needed secular growth opportunity that the aging installed base of elevators globally represents for Schindler and its major elevator original equipment manufacturer peers. Schindlers operating margin showed pleasing progression--a 50-basis-point improvement sequentially to 11.6% in the second quarter--responding to operational efficiencies, pricing initiatives, and positive sales mix shift toward higher-profit margin aftermarket activities. Our long-term expectations for Schindler remain unchanged as does our CHF 220 fair value estimate. Schindlers shares screen as approximately fairly valued.