Siemens AG (SI) announced very strong numbers for the 4th quarter. Officials at the company were very pleased to announce such strong results and they showed optimism for the company's financial performance in the prospective periods. Peter Loescher, Siemens CEO and President, said, "A strong fourth quarter enabled us to fulfill our expectations for fiscal 2012 and achieve one of our best years ever. Even so, we didn't fully succeed in significantly boosting our performance vis-à-vis our competitors, as we did in recent years. To get back to reaching our own goals, we've launched Siemens 2014, a company-wide program aimed at raising our Total Sectors profit margin to at least 12 percent. We know what we have to do - and we're doing it."
The CEO indicated cost cutting endeavors for the company that will push the profit margin to 12%. This will give the company an edge over its direct competitors - General Electric Company (NYSE:GE) and Koninklijke Philips Electronics NV (NYSE:PHG). The confidence exhibited by officials at Siemens will be reflected in the market performance of the company as the market value of the shares is expected to rise. Following are some of the highlights from the financial information disclosed by the company.
Major Results from the 4th Quarter
The financial information of Siemens for the 4th quarter of fiscal year 2012 indicated that sales increased by 18% to around $5.5 billion in comparison to the financial information the last quarter. When the financial information for the fiscal year 2012 as a whole is taken into consideration, the sales of the company increased by 16% to around $21.6 billion as compared to the last fiscal year.
Considering the overall scope of operations of Siemens AG, it can be said that such increases are highly significant and they are bound to influence the market performance of the company in a major way. The continuous increase in the revenue of the company indicates that it is following an upward trend in revenue and therefore, an upward trend in profitability. The recent results create high expectations for the prospective periods among investors and this scenario will positively influence Siemens's share price.
Cost Cutting Endeavors by Siemens
Although Siemens' increasing revenue will add to the company's profit in the prospective periods, one additional factor that is bound to increase profits is its cost cutting endeavors. The officials at Siemens announced that they will cut $7.67 billion in costs by fiscal year 2014 and in order to do so, the company will sell several of its assets. The sole purpose of cost cutting is to enhance the financial returns to shareholders. Therefore, it can be said that this announcement by Siemens will surely be reflected in its market performance.
The strong numbers exhibited by Siemens in the recent quarter can be directly attributed to the developments in some of its major sectors. Following are some of the recent developments:
Recent Developments in Siemens Energy Sector
One of the most important developments in Siemens Energy Sector is the order for the IPP Qurayyah combined-cycle power plant in Saudi Arabia. This is one of the biggest orders received by the company and its value stands at $1 billion. The electrical energy to be supplied as a result of this project will be sufficient to address one-tenth of the total demand in the country. This order will be tackled by Siemens' Charlotte manufacturing facilities.
Another important development in the Siemens Energy Sector is the order for a power plant in Temple, Texas. This is a multi-million dollar project and the power plant to be installed in this project will be one of the most efficient power plants in the U.S. Siemens also finalized a contract with Pattern Energy for the Ocotillo Wind power project in Southern California.
Development in Siemens Healthcare Sector
The recent developments in Siemens Healthcare sector includes the launch of an imaging solution for visualization of amyloid plaques, a pathological feature related to Alzheimer's, in the brain. This new imaging solution will provide physicians with an opportunity to view and quantify the presence of these features in the mind. This will be very valuable equipment for physicians in the U.S. and all around the world. This launch is expected to positively influence the revenue of the company in the prospective periods. Siemens expects to gain an advantage over Johnson & Johnson (NYSE:JNJ) after this launch.
In my opinion, investors should buy shares in Siemens as there are multiple factors that indicate that the financial performance of the company is on an upward trend. The market value of its shares is expected to rise.
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 (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.