RBC downgrades Siemens to “sector perform” as stock rally limits upside

Investing.com -- Siemens (ETR:SIEGn) was downgraded to a “sector perform” rating from “outperform” in a note dated Wednesday by RBC Capital Markets, reflecting a shift in expectations after the stock’s sharp rally over recent months. 

The company’s share price has surged 41% in the past six months, moving from an 8% sector discount to an 8% premium in EV/EBITA valuation. 

With the stock now trading close to RBC’s €245 price target, analysts see limited room for further upside in the near term.

Revenue for the fiscal year is projected to reach €79.9 billion, marking a 6.4% year-over-year increase. 

EBITA is expected to come in at €11.6 billion, while adjusted diluted earnings per share are forecast at €10.67, slightly down from the previous year’s €10.80. 

Siemens’ price-to-earnings ratio has risen to 22.2x for 2025 estimates, reflecting the recent re-rating of the stock.

A key factor in the downgrade is Siemens ’ ongoing review of its majority stake in Siemens Healthineers, valued at €45 billion. 

Management has signaled that a decision on potentially reducing its 75% holding will be revealed at the December Capital Markets Day. 

RBC analysts suggest that lowering the stake below 50% could unlock up to €34 billion in capital, improving financial flexibility but also raising questions about how that capital will be deployed.

The company has already announced plans to divest 5% of its Healthineers stake to help fund its €10.6 billion acquisition of Altair, a move that aligns with its broader strategy of expanding its digital and software business. 

Siemens has set a long-term goal of increasing digital revenue from the current 12% of total sales to 25%, but analysts caution that high-multiple software acquisitions may not immediately translate into a higher overall group valuation. 

Altair, for instance, was acquired at approximately 30x EBIT post-synergies, compared to Siemens’ current group multiple of 18x.

Despite solid operational performance and a strong balance sheet, RBC’s downgrade reflects concerns about valuation and near-term growth potential. 

The stock currently trades at €236.75, and with a price target of €245, analysts see only marginal upside. 

Siemens is expected to maintain a stable financial position, with industrial net debt likely shifting into a net cash position if Healthineers is deconsolidated. Dividend payments are projected to rise to €5 per share, yielding around 2%.

Key risks flagged in the downgrade include macroeconomic headwinds, supply chain uncertainties, and whether Siemens’ push into software will be properly reflected in its market valuation.