Siemens Earnings: Record Order Backlog Supports Raised Guidance for the Second Consecutive Quarter

Narrow-moat Siemens SIE delivered a strong second quarter, reporting organic revenue and order intake growth of 15%. The mission-critical role of its vast range of products for customers combined with end markets with favorable secular growth trends, supported industrial profit growth of 41% with record profit margins in the digital industries segment. Similar to peers ABB and Schneider, Siemens raised its full-year guidance (the second consecutive quarter it has done so), anticipating organic revenue growth between 9% and 11%, up from its previously upgraded outlook of 7% to 10% growth. EPS guidance was also revised upward to between EUR 9.60 and EUR 9.90 from its previous guidance between EUR 8.90 and EUR 9.40. While we plan to marginally revise our estimates, we don’t expect a material change to our EUR 160 fair value estimate. Shares are marginally undervalued.

An order backlog of EUR 105 billion remains at record levels and offers visibility into the remainder of the fiscal year and fiscal 2024. While revenue growth was broad-based across operating segments (with the exception of Siemens Healthineers) supported by execution of its backlog, order growth was most notable in the mobility and smart infrastructure segments, whereas automation orders in the digital industries segment declined against a strong comparable. Full-year profit-before-tax guidance for the digital industries and smart infrastructure segments was raised, with both delivering record profit levels in the quarter. The SAAS transition of the digital industries segment remains firmly on track, driving over 20% of divisional revenue whereas orders for electrification products grew 34%, supported by large orders from data centre, semiconductor, and power distribution customers.