Siemens raises full-year outlook as profit beats estimates

Siemens AG raised its full-year outlook after renewable energy projects and digital services led to better-than-expected first-quarter profit even as Europe’s biggest engineering company said orders are starting to weaken.

The profit margin for the industrial business is expected to be in the range of 11 percent to 12 percent this year, compared with a previous outlook of 10.5 percent to 11.5 percent, the Munich-based company said in a statement. Siemens also said basic earnings per share would be in the range of 7.20 euros to 7.70 euros, higher than the previous range of 6.80 euros to 7.20 euros. The shares rose 5 percent, the most in more than two months.

“The underlying results of the company are very encouraging,” Morgan Stanley said in a report, noting better margins in the digital, power and gas and health businesses.

The improved financial outlook comes as Siemens refocuses its sprawling portfolio by planning to list its health-care unit after acquiring Spanish wind energy company Gamesa Corp Tecnologia SA. The German maker of scanners, trains and factory equipment has also bought U.S. software companies in a bid to keep pace with competitors like General Electric Co. Siemens on Wednesday nominated Jim Hagemann Snabe, a veteran of software maker SAP, to replace Gerhard Cromme as chairman in January 2018.

Siemens’s improved financial outlook contrasts with the more subdued tone of executives speaking about future orders, which were down 14 percent compared to the year earlier. Chief Executive Officer Joe Kaeser said the trend began in the fourth quarter and continued into the first.

Caution

“We’re also seeing a highly volatile and cautious market reflecting current uncertainties in the political environment,” Lisa Davis, managing board member responsible for energy said at a press conference Wednesday. “This caution is damping investor confidence and resulting in projects being largely deferred.”

The company is having to fight for every order amid “intense” price pressure, according to Chief Financial Officer Ralf Thomas.

Shares rose 4.5 percent, the most since Nov. 10, to 121.25 euros at 9:10 in Frankfurt, valuing the company at 103 billion euros.

First-quarter profit from so-called industrial operations rose 26 percent to 2.51 billion euros ($2.72 billion), the company said. That beat an average of 2.08 billion euros of analysts surveyed by Bloomberg. Net income rose 25 percent to 1.94 billion euros.

Wind Power

Profit at Siemens’s wind power and renewable energy business more than doubled, with sales rising for offshore installations in Europe. Siemens so-called Digital Factory earnings jumped by 60% partly on an electric car venture. The health-care unit reported flat revenue and a 15 percent increase in profit against the backdrop of “clear growth” in Asia including China and Australia.

The train-making mobility division was the worst performer among Siemens’s businesses, with a 15 percent decline in profit. Power and gas profit rose 31 percent due to a large order in Egypt even as markets in Europe, the Middle East and the Americas were in “substantial decline,” the company said.

Total revenue for the quarter was 19.1 billion euros, missing the average estimate of analysts surveyed by Bloomberg of 19.6 billion euros.

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