Siemens' Corruption Issues

Siemens (SI) has been fined 100 million dollars over fifteen years, and barred from bidding on the World Bank's portfolio. The World Bank's portfolio is worth about 140 million dollars sales a year to Siemens.

SI's PM is usually below 5%, but let's be conservative and reduce Siemen's profit 10% PM. Subtract the present value of 100 million dollars fine at 10% over fifteen years and 14 million earnings a year PV, and you have a net decrease in PV of ~$0.0724, $0.65 at 9x PE.

Since the price of SI dropped ~$4, I admit I was wrong about the corruption scandal not materially affecting SI; on the other hand, the numbers say this is a $0.65 fine, not a $4 fine, so I would not be surprised if SI goes back up to $69 on Monday. (The price was already down to $66.77 before the job numbers clobbered the rest of the market.)

At $10.66 re-affirmed guidance, reduce annual guidance by $0.024 (annual cash, not PV) to $10.63, and you still get a price of ~$95 at a 9PEx, or ~$85 at 8PEx. So SI will get a nice bump if earnings come in at guidance; S&P is valuing SI at 9PEx.

Repeating what I said before, SI has 25% of earnings from their green portfolio, and one really cold winter could turn that backlog into a liability if Europeans lose interest in cap-and-trade.

Note: I keep track of SI because I am long GE

Comments

[Michael Boyter:]

Since when did a little CORRUPTION charge ever stop a company from moving forward in this country? Opps it wasn't a charge, They were BANNED from bidding on the World Banks Portfolio. They are letting the pay the fine over 15 years? What is the interest rate? Who's collecting the interest? Why can they get credit on a CORRUPTION fine and the Average American Consumer can't get the money to finance an operation for Grandma? I think the results of this, and the direction they move, will be a good looking glass into the moral constitution of the financial markets in America. Does anyone have any additional insights to this? Personally I need some Air Freshener when I read stuff like this.

Jul 05 10:08 AM

[searcher:]

Say what? Don't let minor details such as facts get in the way of an ignorant rant. Please, at least research the ticker symbols and the who, what, where, and when of the matter at hand before riffing on your favorite 'attitude' preening. You are a posturing fool, Sir.

Jul 05 11:43 AM

[Wisdom vs. ...:]

SI is German company with European corruption issues; generally, large companies in Europe practice corruption actively, because it is the only way for bureaucrats who have no stake to differentiate between projects. the "fine" they are paying goes to support anti-corruption agencies (in other words, promotions and raises for the same bureaucrats).

Jul 05 11:44 AM

[Old Trader:]

I've been watching SI, off and on, precisely because, as the author suggests, its the EU's answer to GE, but in much better shape.

Jul 05 08:59 PM