Kepler Cheuvreux has moved to a "reduce" recommendation on Siemens, lowering its previous "hold" stance. The brokerage's assessment highlights a softer near-term outlook for Siemens' Digital Industries arm and flags structural and strategic developments that have already been reflected in the shares.
In written comments, analysts including William Mackie said that while a number of European industrial lead indicators are stabilizing, confidence measures remain weak. They warn that this combination points to a subdued recovery that will constrain the pace of revenue and earnings growth at the Digital Industries business.
The analysts also note a broader market dynamic: an increase in technology capital spending, partly driven by enthusiasm around artificial intelligence, has not translated into unambiguous strength for industrial software. Instead, Kepler Cheuvreux says there is "increasing uncertainty in the industrial software sector," which weighs on expectations for the division.
Valuation moves among Siemens' core peers are also central to the note. Kepler Cheuvreux highlights a roughly 30% decline in peer valuations, a development that in their view reduces the implied value assigned to Siemens' computer software division.
Separately, the analysts observe that many of the "key structural catalysts" that supported a re-rating of Siemens' underlying business took place in the prior year. They describe those catalysts as largely played out and therefore already embedded in the company's market valuation.
Kepler Cheuvreux further criticizes the execution of the Siemens Healthineers separation. The analysts say the structure and timing of the distribution and deconsolidation have been disappointing. In November, Siemens announced it would reduce its 33.5 billion-euro stake in the medical equipment maker, cutting holdings to 37% or less from 67%. CEO Roland Busch indicated that Siemens plans to continue trimming the stake toward below 20% over the medium term as the company focuses on factory and building automation and train manufacturing.
Kepler Cheuvreux acknowledges some balance-sheet benefits from the planned deconsolidation. The analysts expect the move will further strengthen Siemens' industrial balance sheet and enable ongoing dividend increases and share buybacks. At the same time, they warn that improved balance-sheet flexibility raises the risk of value-dilutive mergers and acquisitions.
Sector and market implications
- Industrial software and automation sectors face constrained revenue and earnings growth assumptions.
- Medical equipment spin-offs and deconsolidations can materially alter industrial balance sheets and shareholder returns.
- Valuation shifts among industrial and software peers can reduce implied division-level value.