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Siemens: Strong Company in Weak Market

By    |   Wednesday, 08 Feb 2012 08:35 AM

Siemens (SI), Europe’s largest engineering company, represents a strong company in a weak market.

The classic industrial conglomerate has risen to the top through technological prowess and customer service that is second to none. Siemens has three units: industry, energy, and health care.

The industrial division supplies about 54 percent of the company’s revenue. Automation and drive technology alone account for almost 20 percent of revenue, according to Morningstar. In the energy arena, Siemens makes turbines used in a variety of power plants.

Siemens assists customers in automating their manufacturing operations, providing them with major cost savings. And it offers constant maintenance support for its products. Siemens’ advanced understanding of its customers’ needs enables it to develop more products for them.

Almost 60 percent of Siemens’ revenue comes from Europe, and therein lies the company’s problem. Europe will likely enter a recession early this year if it hasn’t already. Company officials expect a mild contraction over the first few quarters. That’s bad news for Siemens.

Golden days


"The golden days are gone,” said the company’s CEO Peter Loescher after releasing a weaker-than-expected earnings report for the quarter ended Dec. 31.

"The uncertainties of the ongoing debt crisis have left their mark on the real economy. Although a recovery is expected in the second half of the year, we must work hard to achieve our goals."

Profit from continuing operations fell 27 percent to 1.36 billion euros ($1.77 billion) in the latest quarter from a year earlier. Revenue rose 2 percent to 17.9 billion.

Siemens shares provided an annualized total return of 25 percent over the past three years. Of four analysts tracked by Thomson/First Call, one has a strong buy rating on the stock, two have a buy rating, and one a hold.

The company next reports earnings April 24.

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2012-35-08
Wednesday, 08 Feb 2012 08:35 AM
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