The analysts covering Siemens Aktiengesellschaft (ETR:SIE) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. There was a fairly draconian cut to their revenue estimates, perhaps an implicit admission that previous forecasts were much too optimistic.
Following the downgrade, the consensus from eight analysts covering Siemens is for revenues of €57b in 2020, implying a sizeable 35% decline in sales compared to the last 12 months. Statutory earnings per share are supposed to drop 19% to €4.86 in the same period. Prior to this update, the analysts had been forecasting revenues of €85b and earnings per share (EPS) of €4.86 in 2020. So there's been a clear change in analyst sentiment in the recent update, with the analysts making a pretty serious reduction to revenues and reconfirming their earnings per share estimates.
The consensus has reconfirmed its price target of €103, showing that the analysts don't expect weaker sales expectationsthis year to have a material impact on Siemens' market value. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. The most optimistic Siemens analyst has a price target of €130 per share, while the most pessimistic values it at €45.50. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. These estimates imply that sales are expected to slow, with a forecast revenue decline of 35%, a significant reduction from annual growth of 2.0% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 5.5% next year. It's pretty clear that Siemens' revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The most important thing to take away is that there's been no major change in sentiment, with analysts reconfirming that earnings per share are expected to continue performing in line with their prior expectations. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. Given the stark change in sentiment, we'd understand if investors became more cautious on Siemens after today.
Worse, Siemens is labouring under a substantial debt burden, which - if today's forecasts prove accurate - the forecast downgrade could potentially exacerbate. You can learn more about our debt analysis for free on our platform here.
We also provide an overview of the Siemens Board and CEO remuneration and length of tenure at the company, and whether insiders have been buying the stock, here.
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