Siemens Energy: Not Too Late To Be Bullish

seekingalpha11-22

Siemens Energy's Q4 earnings release highlighted strong growth in Grid Technologies, driven by the electrification megatrend, with a significant increase in free cash flow pre-tax.The company's fiscal...

Source Link

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

Comments

We need your insight to fill this gap

Leave a comment

{"i18n":{"language":"en_US"},"isChannel":false,"data":{"share":"https://ttm.financial/m/news/2485321402?lang=en_US&edition=fundamental","thumbnail":"https://static.seekingalpha.com/cdn/s3/uploads/getty_images/2041045482/image_2041045482.jpg","is_english":true,"pubTime":"2024-11-22 17:44","share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","id":"2485321402","market":"us","top_or_hot":-1,"title":"Siemens Energy: Not Too Late To Be Bullish","media":"seekingalpha","content":"<div>\n<p>Siemens Energy's Q4 earnings release highlighted strong growth in Grid Technologies, driven by the electrification megatrend, with a significant increase in free cash flow pre-tax.The company's fiscal...</p>\n\n<a href=\"https://seekingalpha.com/article/4739530-siemens-energy-not-too-late-to-be-bullish\">Source Link</a>\n\n</div>\n","source":"seekingalpha","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Siemens Energy: Not Too Late To Be Bullish</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nSiemens Energy: Not Too Late To Be Bullish\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-11-22 17:44 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4739530-siemens-energy-not-too-late-to-be-bullish><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Siemens Energy's Q4 earnings release highlighted strong growth in Grid Technologies, driven by the electrification megatrend, with a significant increase in free cash flow pre-tax.The company's fiscal...</p>\n\n<a href=\"https://seekingalpha.com/article/4739530-siemens-energy-not-too-late-to-be-bullish\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"BK4182","symbol_name":"重型电气设备","start_time":0,"source_url":"https://seekingalpha.com/article/4739530-siemens-energy-not-too-late-to-be-bullish","article_id":"2485321402","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/2041045482/image_2041045482.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2485321402","pubTimestamp":1732268660,"columns":[],"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"Siemens Energy's Q4 earnings release highlighted strong growth in Grid Technologies, driven by the electrification megatrend, with a significant increase in free cash flow pre-tax.The company's fiscal year 2024 results exceeded upgraded guidance, with Grid Technologies leading in profitability and order momentum and a promising outlook for FY 2025.Despite challenges in the Gamesa segment, Siemens Energy is on track for a turnaround, aiming for profitability by FY 2028 amid competitive pressures from Chinese OEMs.SMEGF's strategic positioning in gas, grid, and Transformation of Industries segments makes it a compelling investment, with a clear path to earnings growth and favorable market conditions.Karsten Leineke  This article is about Siemens Energy , and how I've changed my view from Hold to Buy. Back in August, I wrote an article Siemens Energy: Awaiting Q4 Results Keenly, that the Q4 earnings release on November 13th would be a crucial catalyst, especially for updates on the Gamesa","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"BK4182":"重型电气设备","SMNEY":"Siemens Energy AG","SMEGF":"Siemens Energy AG"},"translate_title":"西门子能源：现在看涨还为时不晚","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"SMEGF":0.9,"SMNEY":0.9},"content_text":"Siemens Energy's Q4 earnings release highlighted strong growth in Grid Technologies, driven by the electrification megatrend, with a significant increase in free cash flow pre-tax.The company's fiscal year 2024 results exceeded upgraded guidance, with Grid Technologies leading in profitability and order momentum and a promising outlook for FY 2025.Despite challenges in the Gamesa segment, Siemens Energy is on track for a turnaround, aiming for profitability by FY 2028 amid competitive pressures from Chinese OEMs.SMEGF's strategic positioning in gas, grid, and Transformation of Industries segments makes it a compelling investment, with a clear path to earnings growth and favorable market conditions.Karsten Leineke  This article is about Siemens Energy (OTCPK:SMEGF), and how I've changed my view from Hold to Buy. Back in August, I wrote an article Siemens Energy: Awaiting Q4 Results Keenly, that the Q4 earnings release on November 13th would be a crucial catalyst, especially for updates on the Gamesa turnaround. It was a mistake to wait, the ADRs are up more than 70% since then! But I am turning bullish, and not only because of the mega momentum the stock has now. Full Year 2024—Overview of Segment figures Management noted in its shareholder letter that \"For the full fiscal year, SE achieved or exceeded the upgraded guidance for all key performance indicators\". Siemens Energy has a fiscal year ending September 30, so we can now look at the full-year results. Siemens Energy Q4 shareholder letter For more detail, we can look at the Earnings Release from November 13, 2024, where we can see free cash flow pre-tax. In that important metric, Grid Technologies at EUR 2,228 million is now clearly the most important segment, leading Gas Services' free cash flow pre-tax EUR 1,393 million. Gamesa is still bleeding, although the losses in 2024 were less bad than 2023. Transformation of Industry, while profitable and growing fast, is still a small segment for Siemens Energy, although free cash flow pre-tax in FY 2024 grew rapidly from EUR 192 million to EUR 411 million. Siemens Energy Q4 Earnings Report Grid Technologies What is turning me bullish on Siemens Energy is that Grid Technologies is a market leader in an industry that is in the midst of the megatrend of electrification. This isn't just expectations about the future, but Siemens Energy is already getting strong growth here. This is reflected in the financials. The earnings release noted \"Contributions and improvements to Free cash flow pre-tax were led by Grid Technologies reflecting higher profit as well as order momentum\" and that was \"mainly due to its profit development and advance payments related to order growth.\" This corroborates with what I wrote recently about National Grid plc, that the UK grid operator \"had reached an agreement with the UK regulator Ofgem to be allowed to make up from payments to the supply chain to secure capacity for equipment such as for transformers and high-voltage direct current (HVDC) cables.\" Helpfully, Siemens Energy also breaks external revenue of segments down into New Units (essentially equipment and systems) and Service (essentially things like installation and commissioning and repairs and maintenance). Grid Technologies, saw external revenues of EUR 8,528 million in New Units and EUR 536 million in Service in fiscal year 2024. New Units are a leading indicator for Service because often the client will contract the OEM to undertake the service of the equipment and systems. Siemens Energy guides us that for Grid Technologies, FY 2025 should see revenue growth of about 24%. For profit margin before special items it guides about 11% (it was 10.5% in 2024 and 7.6% in 2023). By fiscal year 2028, management expects low-double digit compound annual growth rates from 2024 in revenues, and that it can get to a profit margin of about 14%. In Gas Services, the company has guided towards low / mid-single digit revenue growth rates to FY 2028. My view is that until we get industrial and utility scale battery storage, electricity generation from gas is going to be vitally important to supply steady baseload power when the world is moving to renewables. This complexity of intermittent renewables, combined with gas power, is bullish for both Siemens Energy's Grid Technologies and Gas Services businesses. In the long term, in the developed world at least, society would like to reduce dependency on natural gas, so Gas Services would become a mature if not legacy business eventually. However, Siemens Energy has hedged this future by investing heavily in clean energy technologies in its Transformation of Industry segment, which has four sub-segments: Sustainable Energy Systems; Electrification, Automation, Digitalization; Industrial Steam Turbines & Generators; and Compression. The electrification megatrend Siemens Energy's Q4 shareholder letter has a good summary of the electricity story through 2030. Siemens Energy Q4 Shareholder letter The shareholder letter goes on to say:  We are acting in a very favorable market environment. Population growth, a rising standard of living and electrification of transport as well as industrial processes will continue to drive additional electricity consumption at a rate of 2.5% to 3% per year. This means that every year electricity consumption will grow by the equivalent of the consumption of Japan, the world's fourth largest economy. This, however, is only the base case. The rapid rise of electricity demand for data centers also driven by the use of artificial intelligence models is an additional upside. By 2030 it may lead to an additional increase in electricity consumption of 1,500 TWh. 1,500 TWh is roughly equivalent to three times the electricity consumption of Germany, the world's third largest economy. To cope with the base case growth scenario of electricity consumption, global power generation capacity has to double by 2040 as renewables account for a bigger share of the installed base. Considering that a large part of the existing coal and oil plants will be taken out of service, it becomes clear that we are facing unprecedented demand to build new capacity. The demand growth is now even a push to some nuclear renaissance, not only in the US, but also in the UK, France and Eastern Europe. All of this supports the need for grid investments which are reaching unprecedented levels. The enormity of the task ahead of us can be captured by just two facts: grid connected renewable capacity will rise more than five times by 2050 and 50% of today's grid infrastructure in the advanced economies of Europe, the US and Japan will have to be replaced over the next 20 years. In addition, we need to digitize the grid to use the existing assets more efficiently.  This isn't just rhetoric. I am seeing this everywhere across energy and utility companies I am looking at. Indeed, the share price performance of Siemens Energy and peers in the gas and power equipment and services sector between August 7, 2024, and November 19, 2024, has been very strong. Siemens Energy +87.4% GE Vernova (GEV) +104.7% Baker Hughes (BKR) +25.2% Hitachi (OTCPK:HTHIY) +17.8% Mitsubishi Heavy Industries (OTCPK:MHVYF) +35.8% Gamesa turnaround Investors should feel happy that Siemens Energy has had a good start to its turnaround of the disaster that was Siemens Gamesa. While losses of about EUR 1.3 billion are expected in FY 2025 for the segment, management is confident of a 3–5% profit margin by FY 2028. Importantly, Gamesa has re-introduced 4.X and 5.X platforms in its offshore markets. This is an important signal that the crisis management period has ended. The strategy Siemens Energy has stated is to streamline Gamesa, its portfolio and manufacturing footprint, exit unattractive markets, and it is enforcing strict discipline on contractual terms and conditions. For me, though, the investment thesis for Siemens Energy is the medium term opportunity in its gas and grid segments and the longer-term opportunity in its Transformation of Industries segment. Gamesa might be turning around, but the competitive environment it is getting more difficult, for reasons I'll discuss next. Risks for Gamesa Gamesa certainly faces large threats from Chinese wind turbine OEMs. This has been discussed in recent years in the Wall Street Journal, in a 2022 article Chinese Wind-Turbine Companies Seek Global Growth as Western Rivals Struggle and in a 2023 article Europe's Wind Industry Calls for Support Amid Mounting Struggles, China Competition. It was also highlighted in trade publication Recharge earlier this year Record Chinese WindEnergy Hamburg turnout underlines growing global ambition. WindEnergy Hamburg is the wind industry's leading trade fair. The Oxford Institute for Energy Studies published a research paper titled Clean energy innovation in China: fact and fiction, and implications for the future—explaining how China has come to dominate cleantech such as solar and batteries. So, I feel the threat to Gamesa is very real. In an ideal world, Siemens Energy would divest its entire wind business before this threat plays out. Realistically, they will have to return Gamesa to profit before they could do this. In my last article on the company, I wrote, \"At the capital markets day last year, management said it aimed to break even by fiscal year 2026 at Gamesa. This is because many contracts which still need to be fulfilled had locked in losses, and profits are only recognised on completion and delivery of product to customer.\" At least at these full-year results, the company said it was on track to break even for fiscal year 2026. There is a reason Siemens Energy doesn't operate in the solar equipment space, and that is because they cannot compete with the Chinese manufacturers. In my view, Siemens Energy will need to depend on some kind of protectionism in Europe to defend its European market share, and it may need to give market share, in the longer term, in other regions in wind. It might be somewhat protected by its brand, and that some wind customers are also customers in gas, grid and transformation of industries, and hence the relationship and asset knowledge is something Chinese wind OEMs won't have in many cases. But several utilities have said this year that they focus on value and quality, not nationality of the supplier, so we'll have to see. The weak stock price performance of pure play European wind OEM, Vestas in the last couple of years, also may be due to the recognition of this threat. As discussed on the full-year earnings call, as there were several questions about this for SE's management, its US manufacturing base does protect it quite well from the threat of Trump tariffs on imports. Conclusion Siemens Energy has upgraded its midterm growth and profitability targets for Full Year 28. This is because in Grid Technologies its market position is first in solutions and second in products, making it the go-to company in the electrification megatrend which is picking up speed. The stock has a PE of about 33x, which reflects the growth opportunity in the company. GE Vernova—which has a very similar portfolio and market position, has a PE of about 75x. Both stocks have great momentum, both stocks are the key \"picks and shovels\" of the electrification megatrend, and the need to increase gas to power and to upgrade the aging electrical grid make them the obvious investments to play this megatrend. Jim Rogers once said that he would just wait until all he needed to do was to just walk over and just pick money off the floor, before he invested. He meant some investments are very obvious. This is one of those occasions. Siemens Energy has a clear path towards earnings growth, and its multiple still has room to grow too. As a spin-out from Siemens in 2020 many investors would not have been familiar with the business, but the stock is a German DAX index constituent and its market cap of EUR 38 billion means it is large enough for most international investors to buy it, and it has the liquidity to get in and out of easily, which is also important. This is a stock I want to own now, and I am going to play close attention to how it develops, meaning the momentum in orders and deliveries in gas, grid and Transformation of Industries, as well as the turnaround and competitive positioning in wind. Others may prefer GEV, but Siemens Energy seems better value.  Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"1","news_tag":"analysis","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.3","shortVersion":"4.29.3","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2485321402"}