Shares of German industrial conglomerate Siemens AG (SI) scaled a new 52-week high of $137.11 on Dec 26, before closing the trading session a notch lower at $136.85 for a healthy year-to-date return of 31.5%. Siemens’ share prices have been on an uptrend after it had announced a favorable fiscal 2014 outlook along with its fourth quarter fiscal 2013 earnings release.
Despite its strong price appreciation, this Zacks Rank #3 (Hold) stock still has enough fundamentals that may further drive the stock upward. The stock is currently trading at a forward P/E of 14.7x and has a long-term earnings growth expectation of 12.0%.
Growth Drivers
For fiscal 2014, 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 €5.03 ($6.66) in fiscal 2013.
Furthermore, “Siemens 2014” – a cost-cutting initiative by the company is expected to reap huge benefits in the current fiscal. Launched in fiscal 2013, this restructuring program aims to create sustainable value and intends to raise net profit from segments by at least 12% during fiscal 2014, thereby augmenting long-term growth.
In its recent annual report, Siemens reiterated that it expected all the operating segments to be in their respective margin corridors in fiscal 2014. The company also dismissed speculations of a likely divestment of its Infrastructure & Cities (I&C) business due to low profitability in fiscal 2013. Project delays and restructuring initiatives had hampered the profits of this segment. On the contrary, Siemens expects this beleaguered segment to return to optimal profitability levels in the current fiscal and hit the low end of its profit target as well.
Moreover, investors’ sentiment got a boost following the share buyback announcement during the company’s last earnings release. Siemens plans to repurchase stock worth €4 billion ($5.4 billion) in the next two years. Earnings estimates have been rising for this company after its bullish fiscal guidance. In the last 60 days, the Zacks Consensus Estimates for 2014 has moved up by 3.7% to $9.23.
Other Stocks to Consider
Some other players in the industry worth reckoning include Garmin Ltd. (GRMN), Control4 Corp. (CTRL) and Daktronics Inc. (DAKT), each carrying a Zacks Rank #2 (Buy).
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