Introdution
Since it was spun off from its parent company, Siemens AG, and floated on the Frankfurt stock exchange in September 2020, the Siemens Energy Aktie or the Siemens Energy share or stock has had its fair share of volatility. Being a manufacturer, integrator, and service provider of gas turbines for the oil and gas and power generation industries, Siemens Energy’s financial results and stock prices reflect the state and dynamics of the energy industry.
In this article, we will examine Siemens Energy’s historical charts, consider all the factors that may influence the company’s business, assess Siemens Energy Aktie’s growth plan and financials, and try to predict the potential directions for the stock’s development in the short—and long-term periods.
Recent Share Price Performance
The Siemens Energy Aktie began trading at €22 per share on the stock market in September 2020, and it fluctuated highly in the following two years. It was trading at less than €15 by March 2021 but had risen back up to more than €25 by early 2022. Nonetheless, the Russia-Ukraine conflict and high inflation/recession concerns would pull the stock back to new lows below €11 in July 2022.
Siemens Energy is currently valued at €15 per share – significantly down from the IPO price of €22.75. As has been seen, distressing for early investors, the current relatively low valuation presents an opportunity for new capital if the company’s turnaround efforts begin to yield positive results.
Business Overview
Siemens Energy services cover the entire spectrum of electricity generation technology, including gas turbines, wind turbines, and electricity transmission solutions such as electricity grids. It supplies a global customer base of utilities and industrial companies across over 90 countries.
Its business portfolio primarily consists of two segments:
- Gas & Power – A division comprising of fossil power generation products/solutions and the company’s oil and gas service. This segment accounts for about 75% of total revenues.
- Siemens Gamesa Renewable Energy – A wholly owned subsidiary engaged in the manufacturing, installation, and maintenance of wind turbines and is responsible for a quarter of group revenues.
As climate change concerns and the global energy transition intensify, the Gas and Power business has fundamental profit-sustaining structural factors even as it currently delivers strong near-term outcomes. On the same note, Siemens Gamesa is quite strategic, but the firm has lately been experiencing more execution challenges. Solving these subsidiary issues and optimizing traditional fossil fuel-oriented business entities are the major concerns for Siemens Energy in the future.
Underlying Business Performance
Although the stock price declined after the IPO, Siemens Energy’s recent business performance has been improving, pointing to the turnaround story, assuming that execution is successful.
With respect to the year ended September 30, 2021, Siemens Energy had a reasonable order intake growth of 7.5% y-o-y to €31.9 billion. Revenues were also up marginally by 1.8% to €29 billion on the back of better Gas and Power segment results. It posted a net income of €24 million, a sharp improvement from a €560 million net loss in the previous year. More importantly, Siemens Energy achieved a free cash flow of more than €1.5 billion – suggesting early signs of cost-savings and working capital enhancements.
From the beginning of November 2022, the fourth quarter financial results continued to improve—orders from large contracts were up 121% year-on-year, while the company reaffirmed the increased fiscal 2023 outlook.
Should the initial restructuring plans come to fruition, the stock markets may soon embrace Siemens Energy’s revival – a massive bonus for the depressed Aktie.
Key Drivers That Influenced Share Price
As mentioned before, Siemens Energy’s business outlook and stock performance continue to depend on fundamental industry factors as well as its performance. The key factors impacting the Aktie include:
External Drivers:
- Energy Prices—Natural gas/oil and power prices determine customer demand, order intake, and project profitability. Recent volatility leads to risk.
- Energy Transition—While beneficial from a structural perspective for Siemens Gamesa’s renewable division, it has damaging impacts on the wider Gas and Power unit. Policy changes also matter.
- Macroeconomy—Revisions lower energy infrastructure investments by utilities and industrial companies during recessions. Inflation affects Siemens by increasing its input costs and working capital requirements.
Internal Drivers:
- Restructuring Status—The necessary elements include cost savings, portfolio adjustments, and balance sheet management to enhance margins and cash generation. Execution risk remains.
- Siemens Gamesa Fix – The poor performance of this business for the last couple of years due to the project overruns/write-downs is strategic for the group.
- Management Changes – New leadership and strategy could rev up change efforts if done right after some mixed outcomes so far.
Growth Strategy and Trends
Siemens Energy has been confronted with some significant problems in its conventional oil and gas businesses. Still, it envisions itself as a long-term beneficiary of the energy transformation process at the international level.
The company is targeting over 6% annual revenue growth through 2025 based on three key pillars:
- Cost Optimization – over €300 million plus in near-term synergistic cost reduction from layoffs and improved operations.
- Portfolio Realignment – Focusing on Renewables and New Energy while Decompressing on Gas and Power.
- Innovation – Building domain knowledge in new frontier areas such as hydrogen, storage, distributed energy, and software.
If done so, this strategy should enable Siemens Energy to post broadening margins and cash flows in the future years. Achieving or even surpassing financial goals will earn the company credibility in the market, and Aktie will skyrocket.
Competitive Landscape
The competitive pressure that Siemens Energy faces is not constant across all of its business divisions.
In specific reference to the Gas and Power sector, the competitors include GE, Mitsubishi, Ansaldo, and other Chinese competitors. In the Renewables business, Siemens Gamesa’s major competitors are Vestas, GE Renewable, and Goldwind.
This is well supported by current technology leadership in gas turbines and offshore wind, an extensive service network, and Siemens Energy’s large installed base. Nevertheless, issues related to strategy execution could quickly lead to the loss of market share over time in various businesses.
Financial Health and Valuation
Although free cash flow has increased due to better operating cash flows, Siemens Energy’s balance sheet is still under pressure due to losses incurred in the preceding years. Net debt at the end of September 2022 was over €2 billion against a relatively small equity, creating a debt-to-capital ratio of 54%.
However, the company has massive support from its parent company, Siemens, which has direct control of 35% of its equity. Hence, access to borrowed capital continues to be a reliable source.
As for valuation, Siemens Energy is currently serving at a 0.55 Sales and 17 Forward Earnings-to-price ratio based on the consensus estimate for the fiscal year 2023. These values are significantly lower than the corresponding values observed in previous periods and compared to the same indicators of other countries.
If the company sustainably delivers near-to-medium-term earnings targets, there is scope for Aktie to re-rate quite comfortably above €20 once again. However, they will not become more constructive until they see more evidence of actual traction of the turnarounds.
Share Price Prediction for the Near Term
Though relatively low in the current period, the Siemens Energy Aktie price has further fluctuation potential in the next few months, depending on the change in sentiment and the company’s performance.
The downside case is based on an economic recession affecting results in 2023 or other problems at Siemens Gamesa that could lead to downgrades. In such a scenario, the equity could easily re-test the €10-12 range as investors begin to lose faith in their investments.
On the flip side, sound quarterly operating cost cuts and steady profit margins could fuel confidence in the management’s revival strategy. If so, a rebound back towards the high teens in share price looks very achievable during 2023. It is important to note that the author is based in the United States, and due to these considerations, their view may be slightly different from the actual conditions experienced by the company in other countries.
Long Term View
If the current leadership team’s business transformation plan is achieved within the next five to ten years, then there is potential for Aktie’s upside for Siemens Energy.
Siemens Gamesa is a growth engine for the future as penetration of renewable energy sources increases across the globe. On the other hand, rightsizing the Gas and Power unit and transitioning towards new clean technologies such as hydrogen and distributed solutions presents a plausible way of remaining relevant.
If the company builds on its strengths of competent engineering talent and deep domain knowledge to fuel innovation-driven growth, getting back to a share price of more than €25 and making weary shareholders rich before this decade is not an inconceivable possibility.
FAQs
Here are some common questions around the Siemens Energy share price and business prospects:
- Does Siemens Energy have a dividend policy?
In the case of Siemens Energy, the company does not pay dividends to retain cash for business reinvestment and debt service. Management has suggested that dividends might recommence in due course as and when leverage ratios are made more sustainable.
- Is Siemens Energy Aktie overvalued or undervalued in the current trading price?
From a long-term investment perspective, the share is relatively cheap relative to historical values and peers. However, near-term business execution risk remains high.
- What is the current projection for Siemens Energy’s stock price?
The current consensus target price range is €20-€25 within the next 12 months. Based on the financial performance, upside/downside scenarios put the Aktie between €15-€30 in the next 1-2 years.
Conclusion
In conclusion, Siemens Energy Aktie has been a poor performer for IPO investors so far, and the industry outlook and internal restructuring progress are both positive for the medium term.
Long-suffering shareholders could still make big bucks if management puts tactics and innovation outlays into effect. However, one has to wait for more ups and downs before the company starts seeing the fruits of change. Comparing actual results to projected or guided numbers gives the best indicators of future share price direction.
