Earnings Analysis: Siemens AG

| About: Siemens AG (SIEGY)

Siemens AG ADS (SI) reports preliminary financial results for the year ended 2012-09-30.

Siemens AG ADS recently reported its preliminary financial results based on which CapitalCube provides a unique peer-based analysis of the company. Our analysis is based on the company's performance over the last twelve months (unless stated otherwise).

Siemens AG's analysis versus peers uses the following peer-set: General Electric Co. (NYSE:GE), 3M Co. (NYSE:MMM), ABB Ltd. ADS (NYSE:ABB), Koninklijke Philips Electronics N.V. ADS (NYSE:PHG), Hitachi Ltd ADR (OTCPK:HTHIY), Motorola Solutions Inc. (NYSE:MSI) and Nokia Corp. ADR (NYSE:NOK). The table below shows the preliminary results along with the recent trend for revenues, net income and returns.

Annual (USD million) 2012-09-30 2011-09-30 2010-09-30 2009-09-30 2008-09-30
Revenues 101,949.2 102,884.2 102,822.5 103,887.4 116,528.7
Revenue Growth % (0.9) 0.1 (1.0) (10.8) 20.0
Net Income 6,579.5 9,565.6 5,336.1 3,052.2 2,558.8
Net Income Growth % (31.2) 79.3 74.8 19.3 (48.6)
Net Margin % 6.5 9.3 5.2 2.9 2.2
ROE % 16.1 23.6 13.7 8.0 6.5
ROA % 4.6 6.7 3.8 2.2 1.9
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Valuation Drivers

Siemens AG ADS currently trades at a higher Price/Book ratio (2.2) than its peer median (1.6). The market expects Siemens AG to grow at about the same rate as its chosen peers (PE of 15.2 compared to peer median of 15.2) and to maintain the peer median return (ROE of 15.8%) it currently generates.

The company's asset efficiency (asset turns of 0.7x) and net profit margins of 6.4% are both median for its peer group. Siemens AG's net margin has declined 2.9 percentage points from last year's high but remains above its five-year average net margin of 4.9.

Economic Moat

The company has achieved better revenues growth than its chosen peers (year-on-year change in revenues of -0.9%) but its earnings growth performance has been below the median (change in annual reported earnings of -31.2% compared to the peer median of 8.2%). This suggests that, compared to its peers, the company is focused more on top-line revenues. Siemens AG is currently converting every 1% of change in revenue into 34.3% change in annual reported earnings.

Siemens AG's return on assets currently is around peer median (4.6% vs. peer median 4.0%) -- similar to its returns over the past five years (3.9% vs. peer median 3.4%). This performance suggests that the company has no specific competitive advantages relative to its peers.

The company's gross margin of 31.8% is around peer median suggesting that Siemens AG's operations do not benefit from any differentiating pricing advantage. In addition, Siemens AG's pre-tax margin of 9.5% is also around the peer median suggesting no operating cost advantage relative to peers.

Growth & Investment Strategy

While Siemens AG's revenues have grown faster than the peer median (-0.6% vs. -3.6% respectively for the past three years), the market gives the stock an about peer median PE ratio of 15.2. This suggests that the market has some questions about the company's long-term strategy.

Siemens AG's annualized rate of change in capital of -0.7% over the past three years is higher than its peer median of -2.0%. This investment has generated an above peer median return on capital of 10.8% averaged over the same three years. Evidently, the relatively high capital investment was successful given the relatively strong growth in its returns.

Earnings Quality

Siemens AG's net income margin for the last twelve months is around the peer median (6.4% vs. peer median of 6.9%). This average margin combined with a level of accruals that is around peer median (2.5% vs. peer median of 2.8%) suggests there possibly isn't too much accrual movement flowing into the company's reported earnings.

Siemens AG's accruals over the last twelve months are positive suggesting a buildup of reserves. However, this level of accruals is also around the peer median and suggests the company is recording a proper level of reserves compared to its peers.

Trend Charts

Company Profile

Siemens AG engages in electrical engineering and electronics. It operates through the following business segments: Industry, Energy, Healthcare, Equity Investments, and Financial Services. The company was founded by Werner von Siemens on October 12, 1847 and is headquartered in Munich, Germany.


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Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.