Siemens Earnings: Mobility Segment Offsets Declining Order Trends

Narrow-moat Siemens reported 15% organic order growth, which appears impressive, but fails to tell the complete story due to several large order wins in the mobility segment. Destocking for short-cycle products, which do not need to be bought far in advance, due to the easing of supply chain constraints and a strong prior-year comparable led to order declines in the digital industry and smart infrastructure segments of 35% and 1%, respectively. Group revenue and EPS guidance are unchanged, having been raised during the previous quarter. We aren’t overly concerned by possible short-term headwinds from destocking due to the group’s EUR 110 billion order backlog, with few cancellations, as well as Siemens’ book/bill ratio of 1.28 times. We believe quarterly demand volatility doesn't detract from Siemens being well positioned for the digitalization of industrial activities. We maintain our fair value estimate of EUR 160 for Siemens and view shares as marginally undervalued.