On Tuesday, BofA Securities adjusted its position on Siemens AG (SIE:GR) (OTC: OTC:SIEGY (BCBA:SIEGYm)) stock, shifting the rating from Buy to Neutral. The firm set a new price target for the stock at EUR200.00, a slight increase from the previous target of EUR196.00.
The change in rating reflects concerns over the company's Digital Industries (DI) segment's slow recovery and the overall lack of visibility into the future, which is expected to impact earnings momentum until the second half of 2025.
The analyst from BofA Securities highlighted that despite Siemens (ETR:SIEGn) AG's strong performance at the end of 2024, the forecast for the fiscal year 2025 indicates a challenging period ahead.
The earnings per share (EPS) guidance for FY25 is projected to remain relatively unchanged year-over-year, ranging from EUR10.4 to EUR11.0, compared to EUR10.53 in FY24. This outlook suggests a stagnation in earnings growth for the upcoming year.
Market expectations for Siemens' Smart Infrastructure (SI) segment are optimistic leading into the Capital Markets Day, with analysts from Visible Alpha anticipating around 7% organic growth from 2025 to 2028 and margins close to 18.5%.
However, the BofA Securities analyst has reduced the estimated earnings before interest, taxes, and amortization (EBITA) by 5-6% due to lowered expectations for growth and margins in the DI segment. These revised estimates place them 2-4% below the consensus EBITA for the years 2025 to 2027.
The price objective (PO) for Siemens AG has been recalculated using 2026 as the base year, maintaining a 20% premium to an 11x multiple. This adjustment has resulted in the new price target of EUR200.00 for the Siemens stock, which corresponds to an American Depositary Receipt (ADR) price of $105.35, down from the previous ADR price of $109.49.
The updated analysis by BofA Securities indicates a cautious outlook for Siemens AG, with limited potential for stock price appreciation in the near term. The report cites ongoing concerns about the pace at which the DI segment can rebound as a key factor in the downgrade to Neutral.
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