- GE (GE +2.0%) investors should pay attention as Siemens (OTCPK:SIEGY +1.4%) spins out its own power division to investors, writes Al Root in Barron's.
- Siemens Energy, which generates about $35B in annual revenue, is closely matched with GE Power in size and scale. GE's power and renewable-energy divisions have generated about $38B in sales over the past year, accounting for more than 40% of the company's total.
- According to Siemens presentations, the firm expects the power market to grow about 2% a year on average for the foreseeable future. It also expects profit margins to rebound from break even in 2020 to greater than 8% in coming years.
- That should be relatively good news for GE. "The Siemens Energy update suggests our forecasts for GE's Power and Renewable divisions look realistic," Barclays analyst Julian Mitchell wrote in a research note. "The Siemens commentary around a project excellence [and] service focus is encouraging as regards competitive discipline in the market, although at the same time, its high rate of R&D investments and solid balance sheet… underscore that GE will be faced with a focused and strong competitor in this market."
- Mitchell values GE power and renewable assets at about $2.50 a share. Overall, he rates GE stock the equivalent of Buy and has a $9 target price for the stock (it was at $14 at the start of the year).