Siemens Energy Earnings: Guidance Upgrade Lowers Balance Sheet Concerns; Raising Fair Value Estimate

No-moat Siemens Energy upgraded its fiscal 2024 guidance, which most importantly saw it revise its free cash flow before tax guidance to an inflow of EUR 1 billion, after management initially expected a EUR 1 billion outflow. With a lot of bad news having been baked into the stock at the start of the year, including market speculation of a potential rights issues, improving prospects remove investors' balance-sheet concerns and have sent shares open 12% higher and up over 80% year to date. We're raising our fair value estimate by approximately 30% to EUR 19.5, which incorporates a EUR 3 billion cash inflow from disposals and an increase in our short-term revenue outlook, most notably for its Grid Technologies segment, which is a direct beneficiary of the renewable energy transition. Shares are trading at a 10% premium to our revised fair value estimate, and we maintain our very high uncertainty rating.