Siemens Expected to Post Higher Profit on Strong Demand in Smart Infrastructure -- Earnings Preview

By Nina Kienle

Siemens is scheduled to report fourth-quarter results on Thursday. Here is what you need to know:

REVENUE FORECAST: The German industrial company is expected to post 20.77 billion euros ($22.07 billion) in revenue for the quarter to September, according to a company-provided consensus. That compares with the 21.39 billion euros it reported in the prior-year period. According to the same consensus, analysts expect full-year revenue to amount to 75.89 billion euros, a decrease from the 77.77 billion euros it reported last year.

NET PROFIT FORECAST: Siemens's fourth-quarter net profit is expected at 1.87 billion euros, according to the consensus estimates provided by Visible Alpha, up from 1.72 billion euros it reported in the prior-year period. Full-year net profit is expected at 8.20 billion euros, according to the same consensus. Siemens posted 2023 net profit of 7.95 billion euros.

Siemens shares trade 0.81% higher at 179.36 euros and 5.7% higher year to date.

-- The backdrop for the digital industries division is expected to remain overall challenging, with the pressure from destocking in China continuing, JPMorgan analysts said in a research note to clients. "We expect the destock to remain a headwind into fiscal 2025 and, therefore, no sudden pick-up in DI orders and revenues overall in the 2Q or 3Q," the analysts said. In fact, the company might post a slightly lower-than-expected revenue, Berenberg analysts Philip Buller and Scott Humphreys said. Siemens sees comparable revenue for the division 8% to 4% lower than the prior year and a profit margin in the range of 18% to 21%.

-- The smart infrastructure division is expected to see another quarter of strong demand, consistent with peer commentary and strength across a number of key verticals, such as data centers, power distribution and the broader electrification space, JPMorgan analysts said. The analysts see little reason for a slowdown. Berenberg's analysts agree with this view, getting the sense that margins would land at the upper end or even a touch higher than the expected range. Siemens expects comparable revenue growth for the division between 8% to 11% and a profit margin range of 8% to 10%.

--Berenberg's analysts highlighted the company's reassurance that the equity holding in Siemens Healthineers, which has seen its results pressured due to weak demand in China, is being constantly reviewed. They expect a clearer picture of the long-term plan at some point in 2025, they said, adding that Siemens shares seem fundamentally too cheap.

-- Siemens backed its full-year guidance in August, continuing to expect comparable revenue growth for the Siemens Group, profit margin for digital industries at the lower end of the previously-guided range, and profit margin for smart infrastructure at the upper end of the range. Moving into the new fiscal year, JPMorgan analysts expect the guidance to be enough to support the stock. With expectations on digital industries already low, the upcoming capital markets day can be seen as a positive catalyst, shining a light on an underappreciated assets, they said.

Write to Nina Kienle at nina.kienle@wsj.com

(END) Dow Jones Newswires

November 13, 2024 06:40 ET (11:40 GMT)

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