[he calls Siemens "GE's much better managed doppelgänger" -ed]
The German industrial giant has undergone one of the lengthier restructurings in corporate history. The result could be fatter profits and a more valuable stock.
SIEMENS MIGHT BE 163 years old, but the German industrial giant is acting as nimble as a teenager these days. Credit that to a 12-year—yes, 12-year—restructuring program focused on cutting costs, workers and underperforming units. The results enabled the Munich-based company to weather the financial crisis of the past two years relatively smoothly, while rivals such as General Electric stumbled.
Coming out of the crisis, a slimmed-down Siemens (ticker: SI) is poised to gain more market share in its three lines of business—industrial, health care and energy. The company also has redoubled its focus on shareholders, who have benefitted this year from a 25% rally, to 114, in Siemens' American depositary receipts. That performance, which Chief Financial Officer Joe Kaeser calls "a reward for the efforts on transformation," has left both GE (GE) and Switzerland's ABB (ABB) in a cloud of dust. Siemens could keep climbing to 140 per ADR as the global economy improves, lifting demand for gas turbines, high-speed trains and medical equipment.*Previously:
In the thick of the global recession, in 2009, Siemens' earnings from continuing operations jumped 32%, to €2.5 billion, or €2.58 a share. The company followed up, in the fiscal year ended Sept. 30, with earnings before special charges of €4.1 billion, or €4.49 a share, on revenue of €76 billion. Buoyed by a 25% rise in orders in the fiscal fourth quarter, and an €87 billion ($115 billion) order backlog, management, led by CEO Peter Löscher, 53, announced plans to raise the dividend 69%, to €2.70 a share, the first increase in three years, for an indicated yield of 3.1%.
Analysts expect Siemens to earn €6.72 a share in fiscal 2011, and nearly €8 a share in fiscal '12. Industrial equipment and solutions account for about 46% of annual revenue; energy-related businesses chip in 34%, and health care, 16%.
Notwithstanding Siemens' operating strides, its shares trade for only 13 times this fiscal year's expected earnings. That multiple is in line with GE's valuation, but below Siemens' 10-year average price/earnings ratio of 18, and ABB's P/E of 14.
Siemens' shares are cheap for several reasons. Investors are skeptical of turnaround stories generally, and the company must live down a history of creating a bloated corporate structure and overpaying for acquisitions....MORE
"Siemens Long-Cycle Industry Customers Weighing Investments Again" (SI)
"Siemens Reports Big Jump in Orders" (SI)
I'll See Your Eco-imagination and Raise: "Siemens Predicts Sales of Green Technology Products to Reach $55 Billion" (SI; GE)
Siemens; ABB lifted to conviction buy at Goldman: ABB, Siemens, Schneider to Gain From Demand for Smart Grids, Goldman Says (SI; ABB)
Siemens Sees Strong Profitability, Decides to Open a Bank (SI)
And many more, use the search blog box, keyword Siemens.
For more on Siemens vs. General Electric see: