Shares in German industrial giant Siemens(OTC: SIEGY) were down by more than 6% at 11 a.m. ET this morning. The move comes after CFO Ralf Thomas's presentation at a Bank of America Industrials Conference warned of slower-than-expected orders growth at its key digital industries segment in its financial second quarter.
What Siemens's management said
The digital industries segment comprises Siemens's automation, motion control, and industrial software businesses. It's seen as its most exciting long-term growth business due to its role in helping companies automate production and digitize their manufacturing processes.
However, the industry is seeking near-term weakness this year due to a slowing global economy and a notable weakness in China. In addition, distributors are destocking after a period of aggressively building inventory in response to supply chain challenges that caused delivery delays. Siemens's U.S. rival Rockwell Automation(NYSE: ROK)has reported similar conditions.
Both Siemens and Rockwell should see a gradual improvement through 2024. Still, unfortunately, orders are set to decline by a low-teens percentage in the second quarter for Siemens in its digital industries segment, with revenue down by a mid-single-digit percentage -- a worse-than-expected result that's pushing profit margins to the low end of the segment's expected range of 17%-23%. In addition, Thomas conceded that the full-year digital industries revenue growth target of 0%-3% could be challenged.
Image source: Getty Images.
So is Siemens a buy?
On a more positive note, Thomas said the smart infrastructure (electrification, building, and electrical products) segment's revenue growth and profitability were tracking toward the high end of expectations in the second quarter.
The disappointing news calls into question the timing of a recovery in orders and revenue growth, not least in China and from export-led demand countries like Germany and Italy.
Still, it looks likely to be a push-out-of-order growth rather than any challenge to the need for automation and industrial software, and history suggests this could be an excellent opportunity to buy into an investment theme with legs.
Should you invest $1,000 in Siemens Aktiengesellschaft right now?
Before you buy stock in Siemens Aktiengesellschaft, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Siemens Aktiengesellschaft wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than tripled the return of S&P 500 since 2002*.
*Stock Advisor returns as of March 18, 2024
Bank of America is an advertising partner of The Ascent, a Motley Fool company. Lee Samaha has positions in Siemens Aktiengesellschaft. The Motley Fool has positions in and recommends Bank of America. The Motley Fool has a disclosure policy.
