Siemens Reports Mixed 3Q17 Results, Reaffirms FY17 View

Siemens Reports Mixed 3Q17 Results, Reaffirms FY17 View
August 29, 2017

 
A 9% decline in the new orders triggered a downtrend in the stock of diversified industrial conglomerate Siemens A G (OTCMKTS:SIEGY) in the second week of August. Lower-than-anticipated consolidated revenues also fuelled the bearish sentiment. However, on the basis of facts presented below, we expect the stock, which closed at $131.90 yesterday, to go up in the near future.

The German company stated that its revenue rose €1.609 billion to €21.413 billion in the third-quarter of 2017, from €19.804 billion in the corresponding quarter of 2016. Net income in 3Q17 was €1.464 billion, or €1.70 per share, compared with €1.372 billion, or €1.60 per share, in 3Q16. Analysts had anticipated Siemens to report earnings of €1.36 billion on revenues of €21.8 billion.

During the quarter, new orders declined 9% y-o-y to €19.82 billion and missed analysts anticipation of a 2% gain. Siemens stated that its renewable energy (Gamesa) and power and gas units received 49% and 41% lesser orders, respectively, compared to last year.

Segment wise, Siemens’ industrial businesses recorded earnings of €2.30 billion, up 3% on y-o-y basis, but missed analysts’ forecasts of €2.38 billion. Profit margin declined to 10.4%, from 10.8% a year ago.

Siemens, which is mainly regarded as a heavy engineering company, acquired several software companies in the recent past and brought them under the technology based services unit. The revenue from the tech division jumped 18% to €2.96 billion, while profits increased 23% to €485 million. To the surprise of analysts, profit margin increased to 16.4%, from 15.7% a year ago.

The company also reaffirmed its FY17 outlook, saying it continues to anticipate an industrial profit margin in the range of 11% to 12%, and basic EPS in the range of €7.20 to €7.70 per share. The supervisory board of Siemens also extended the term of CEO Joe Kaeser, until 2021.

The company stated that it will spin off the Healthineers division as a separate entity and list the latter sometime in 2018. Healthineers was the largest contributor to the bottom line of the company, during the recent quarter. Analysts expect the healthcare group to command a market valuation of about €40 billion.

On the basis of robust results, Barclays PLC has given a price target of €125 ($147.06) for Siemens. The stock currently carries a ‘neutral’ rating from the bank. Thus, mixed results and lacklustre guidance are expected to keep the stock range bound with a mild bullish bias in the short-term.

Technically, the stock has bounced off the support at 130. The short-term cyclical momentum has crossed above the long-term momentum. Thus, we can expect an appreciation in the stock price.

Siemens - Technical Analysis - 29th August 2017

It would be prudent to invest in a high or above option to gain from the uptrend. We would consider investing when the stock trades near $132 in the OTC market. Furthermore, a date around September 7th would be chosen for the contract expiry.

Disclaimer: The trading analysis offered here is our opinion. It is not provided as trading advice, merely an indication of our trading plan. We cannot guarantee success and we encourage traders to incorporate a strong money management strategy to limit losses. Please use this article as part of your own research before formulating strategies prior to trading.

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Andrew Wright

Prior to founding tradersasset.com in 2014, Andrew worked as a proprietary trader, then as a market maker. As a market maker, he traded options in over 100 stocks, he then began trading currency pairs in 2013. Andrew still actively trades both, and prides himself on educating and informing traders on the benefits of both Binary Options and Forex.


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