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Hiking Our Fair Value Estimate for Siemens

Good order growth and increasing profitability at the narrow-moat company led to the boost.

We increase our fair value estimate for

We forecast 12.1% operating margins for Siemens' industrial business in 2017 (previously 11.9%), with further expansion to 13.2% for 2021. In the second quarter of 2017, Siemens’ industrial business margin expanded 120 basis points; we expect management’s focus on fixing underperforming businesses and cultivating operational excellence will further enhance operating margins. Our estimates are at the high end of management's 2017 outlook, with the industrial business' profit margin in the 11.9%-12% range. Siemens’ focus on portfolio optimisation and cost reduction mitigates the impact of cyclical swings and ongoing weakness in oil and gas and other commodity-related markets. However, owing to recent share price gains, we believe the shares are slightly overvalued.

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About the Author

Jeffrey Vonk

Equity Analyst

Jeffrey Vonk, CEFA, is an equity analyst for Morningstar Holland BV, a wholly owned subsidiary of Morningstar, Inc. He covers diversified industrials.

Before joining Morningstar in 2014, Vonk was a director and lead analyst for ING Equity Markets for two years. From 2001 to 2010, he worked for APG Asset Management, Europe’s largest pension fund, as a senior portfolio manager in charge of a EUR 1 billion equity portfolio and as a lead analyst responsible for generating investment ideas for the firm’s EUR 10 billion core fund.

Vonk holds a master’s degree in economics and business from Vrije Universiteit Amsterdam. He also holds the Certified European Financial Analyst (CEFA) designation from the European Federation of Financial Analysts Societies.

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