Siemens AG: Earnings Beat Expectations, Analysts Weigh In

Siemens Aktiengesellschaft (Siemens AG) has delivered a strong set of earnings for the first quarter of its fiscal 2025, surpassing market expectations across several key metrics. The company reported an impressive 3% year-over-year increase in revenue to €18.4 billion, with orders rising in all industrial businesses except Mobility, which had recorded a sharply higher volume from large orders in the previous quarter. As a result, orders for Siemens overall declined 7% to €20.1 billion, with a book-to-bill ratio of 1.09.

The company's industrial profit surpassed consensus estimates by 7%, while earnings per share (EPS) came in 12% higher than anticipated. This robust performance can be largely attributed to the strong growth in its Digital Industries (DI) segment, particularly within the software division, which experienced an astonishing 82% increase in revenue. The DI Automation area, however, faced a significant 25% decline in sales, primarily due to ongoing destocking trends in Europe and the United States. Conversely, China displayed resilience, showing a 25% year-over-year increase in orders, highlighting the varying regional dynamics at play.

Despite the overall positive outlook, analysts from RBC Capital Markets caution that the market reaction may be more subdued, as attention shifts to the DI run rate heading into the fourth quarter and into 2025. This focus on future performance could temper enthusiasm, especially given the mixed results from other segments. The DI Automation area, for instance, faced a significant 25% decline in sales, primarily due to ongoing destocking trends in Europe and the United States. Conversely, China displayed resilience, showing a 25% year-over-year increase in orders, highlighting the varying regional dynamics at play.

The Smart Infrastructure (SI) segment also showcased strong performance, with a 21% increase in revenue from Electrification, which has bolstered margins through high capacity utilization. This indicates that while some areas are struggling, others are thriving, contributing positively to the overall financial health of Siemens.

On the healthcare front, Siemens Healthineers fell short of expectations by 7%, aligning with its previous quarterly reporting after accounting adjustments. This underperformance in the healthcare segment is a notable concern, as it reflects broader challenges within the industry, which could impact future growth prospects.

Siemens has reiterated its full-year guidance but has indicated that group sales growth is likely to remain at the lower end of its previously stated target range of 4-8%. For the DI segment, margins are expected to be at the lower end of the 18-21% range, while SI is projected to achieve margins at the upper end of the 16-17% range. Mobility is anticipated to deliver a revenue growth of 8-11%, with margins ranging between 8-10%.

Market consensus currently anticipates a 4.3% organic growth for the group, with an EPS pre-PPA and Siemens Energy forecasted at EUR 10.43. Notably, the surge in software activity during Q3 is not expected to carry over into Q4, which raises concerns about potential declines in DI margins. Analysts estimate that these margins could drop to the low to mid-teens range, signaling a need for cautious optimism moving forward.

As Siemens navigates these mixed results, investors will be closely monitoring the company’s ability to maintain momentum in its strong segments while addressing challenges in others, particularly in the context of evolving market conditions and regional dynamics.