Siemens Posts Exceptional First Quarter Boosted by Customer Inventory Building

Exceptionally strong demand for automation and electrical components products boosted Siemens' first quarter 2022 demand, leading to results above company provided consensus. Orders were up a whopping 36% and revenue 9% on an organic basis. Management’s full year guidance now looks conservative given the high order backlog already booked in the first quarter of the fiscal year. The backlog will likely take a couple of quarters just to work through. Automation products from discrete end markets pushed the digital industries book to bill ratio to 1.6 times in the first quarter of fiscal year 2022, while 2021 full year book to bill for the division was already above 1 at 1.12. The smart infrastructure division saw strong demand for electrical components with a book to bill of 1.3 in the quarter, also above trend. For both divisions a key driver behind the exceptional demand is likely from customers building up inventories, a defensive move against both supply chain shortages and anticipated price increases. Overall book to bill for the industrial business was 1.5 times in the quarter and will support revenue for the next quarter or two. We currently sit in the middle of management guidance but expect to revise up our full year forecasts. However, we do not expect the changes to materially impact our fair value estimate, and our narrow moat rating remains intact.