Impressive Q1 Earnings at Siemens - Analyst Blog
January 29 2014 - 10:50AM
Zacks
Industrial goods manufacturer
Siemens AG (SI) reported solid first quarter
fiscal 2014 net income of €1,457 million ($1,982.8 million) or
€1.68 per share ($2.29), up from €1,214 million ($1,652.1 million)
or €1.40 per share ($1.91) in the year-earlier quarter. The healthy
year-over-year increase in earnings is primarily attributable to
the company’s stringent cost-cutting strategy, owing to which cost
of sales drastically declined to €12,086 million ($16,447.8
million) in the reported quarter from €12,738 million ($17,335.1
million) in the year-ago period. Total sector profit was €1.789
billion ($2.43 billion), up from €1.560 billion ($2.12 billion) in
the year-earlier quarter, largely driven by a strong performance by
the Infrastructure & Cities segment.
Total revenue in the reported quarter decreased 3.3% year over year
to €17,325 million ($23,577.6 million), primarily due to a drop in
revenues from all the segments except Infrastructure & Cities.
On a regional basis, revenues decreased significantly in the
Americas owing to weak wind power markets in the U.S.
For first quarter fiscal 2014, orders increased 9% year over year
to €20,836 million ($28,355.7 million) due to higher orders from
all regions and higher volume from large orders. The book-to-bill
ratio for the quarter was 1.20, while order backlog reached a
record high of €102 billion ($138.8 billion) at quarter end.
Segment Results
In the Energy sector, Siemens recorded an 8%
year-over-year decline in revenues to €5,782 million ($7,868.7
million), dragged by significant drop in revenues in Europe/ CAME
(the Commonwealth of Independent States, Africa and the Middle
East) and the Americas, partially offset by growth in Asia and
Australia. The segment profit for the reported quarter increased
23% year over year to €506 million ($688.6 million) due to a robust
Wind Power business. From fiscal 2014, Siemens has combined the
Fossil Power Generation Division and the Oil & Gas Division
into a single unit under the name Power Generation.
Healthcare sector profit decreased 6% to €471
million ($641.0 million) due to lower revenues. Revenues dipped 5%
year over year to €3,199 million ($4,353.5 million) in the wake of
weak economic conditions in Europe, uncertainty in the healthcare
market and an excise tax on medical devices in the U.S., and
slowing growth in China.
In the Industry sector, revenues were down 2% year
over year in the quarter to €4,611 million ($6,275.1 million) as
growth in Europe/CAME was more than offset by a decline in the
Americas. Sector profit was down 5% year over year to €482 million
($655.9 million) due to adverse currency translation effects.
Infrastructure & Cities sector recorded a 5%
year-over-year improvement in revenues due to solid growth at
Transportation & Logistics. On a geographic basis, revenues
were up in Asia, Australia and Europe/CAME and declined in the
Americas. Sector profit increased a notable 133% year over year to
€330 million ($449.1 million) due to improved performance across
the sector and solid project execution in the Transportation &
Logistics business. Sector profit also increased due to a
comparatively better business mix, particularly within Power Grid
Solutions & Products. The healthy sector profit was also
attributable to the solid execution of the “Siemens 2014” program,
which reduced the sector’s cost structure, adjusted capacity and
optimized regional footprint as per demand.
Balance Sheet and Cash Flow
Net cash used in operating activities at quarter-end stood at €303
million ($412.4 million). Cash and cash equivalents at quarter-end
were €8,885 million ($12,091.6 million), while long-term debt was
€18,377 million ($25,009.3 million). For the reported quarter
adjusted ROCE (return on capital employed) was 18.0%, which was
well within the target range of 15% to 20%, compared with 14.9% in
the year-ago quarter.
Outlook
The company expects markets to remain challenging in fiscal 2014
with recovery in short-cycle businesses occurring in the latter
half of the fiscal. Siemens expects orders to exceed revenues for a
book-to-bill ratio above 1. Earnings per share for fiscal 2014 are
anticipated to increase by at least 15% from €5.08 in fiscal
2013.
Siemens presently has a Zacks Rank #5 (Strong Sell). Players in the
industry worth reckoning include GigOptix, Inc.
(GIG), IEC Electronics Corp. (IEC) and TE
Connectivity Ltd. (TEL), each carrying a Zacks Rank #2
(Buy).
Note: 1 € = $1.3609 (period average from Oct 1, 2013 to Dec 31,
2013)
One Siemens ADR
corresponds to one Siemens share.
GIGOPTIX INC (GIG): Free Stock Analysis Report
IEC ELECTRS NEW (IEC): Free Stock Analysis Report
SIEMENS AG-ADR (SI): Free Stock Analysis Report
TE CONNECT-LTD (TEL): Free Stock Analysis Report
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