Siemens after Earnings: What went wrong?

German conglomerate Siemens has published its quarterly and annual results. The company disappointed investors across the board, costing it nearly 10% of its valuation lost in just one session.

• The company's revenues reached 21.4 billion, marking a 6% year-over-year increase and falling only slightly below market expectations.
• However, the EPS performed poorly, dropping to 2.08 compared to market expectations of 2.55. This significant decline is due to a 13% drop in net profit from the company's main segment.

The company's situation is beginning to improve from a broader and long-term perspective on the results.

• Annual revenue increased to 78.9 billion Euros, orders amounted to 88.4 billion, and net profit saw a record 16% increase, reaching 10.4 billion. It's important to remember that this result is burdened by Siemens' acquisition of Altair and Dotmatics, which cost 10 and 5 billion Euros, respectively.
• Record-breaking free cash flow reached 10.8 billion Euros, and the backlog at the end of the year was already 117 billion Euros.

In terms of segments, on a quarterly basis:

• "Digital Industries" grew the most, by as much as 29%.
• "Smart Infrastructure," despite lower profits, could boast 20 consecutive quarters of operating margin growth.
• "Mobility" performed poorly, with a massive decline of 45%.

These results would be fully satisfactory for the market if not for the company's forecasts for the next year.

EPS is expected to be between 10.40-11.00, which is about 7% lower than the market consensus indicated. The company notes that this decline is due to pressure from unfavorable exchange rate differences.

The company's CEO defended the company's decisions and strategy at the earnings conference, emphasizing the importance of generating free cash flows.
Ultimately, the company sets ambitious goals to increase its share in more profitable market segments while maintaining a very generous dividend policy. Investor disappointment with the conservative forecast is expected, but the scale of the correction allows questioning the fundamental justification for its depth.

SIE.DE (D1)

Source: xStation5