Siemens Cranks It Up

Siemens has a strong quarter

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What's going on?

Siemens, Europes largest industrial manufacturer, delivered iron-clad second-quarter results on Wednesday and its stock hammered up 5%.

What does this mean?

Siemens surpassed analyst estimates, delivering sales that were 4% higher than the same quarter last year. The German industrial powerhouse also saw its future orders chug 6% higher, thanks to a number of large contract wins including an $850 million order from America’s Amtrak to manufacture, deliver, and service diesel-electric trains.


Profit in the companys core industrial business was 6% higher than this time last year. Profit overall, however, fell but that was largely due to a prior one-off benefit making last years profit abnormally high.

Why should I care?

For markets: Dont follow in General Electric (GE)s footsteps.


Siemens said on Tuesday that itll spin off its struggling gas and power unit which may help the company avoid going the way of rival US conglomerate GE, whose stock has plummeted 65% over the last two years. GEs fall from grace was precipitated by worries that the conglomerate way of working just doesnt cut the mustard anymore too many businesses under one roof can be prone to leaks. And chopping through two CEOs and cutting its dividend twice during that period (to a single penny) hasnt helped GE convince investors otherwise. By spinning off gas and power, Siemens should be able to focus its attention on more profitable parts of the company and the sale could provide a helpful cash boost.



The bigger picture: Spinoffs get value turning.


A conglomerate discount where the value of a whole firm falls short of the sum of its individual parts has been known to befall big, diversified companies like Siemens, resulting in stock prices that seem to deliberately lowball the value of a companys assets. With a successful 2018 spinoff of its Healthineers business under its belt, Siemens will likely be trigger-happy to cut its gas and power unit and hopefully see its stock price rise.

Originally posted as part of the Finimize daily email.

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