Shares of Siemens Energy declined on Friday following a reassessment by Morgan Stanley that removed the German power-equipment group from the bank's roster of top stock picks. While the investment bank maintained an Overweight rating and a price objective of €166, it said elevated geopolitical tensions in the Middle East prompted a more cautious short-term posture.
By 10:48 GMT, Siemens Energy stock had fallen 4.7% to €143.15, reflecting investor reaction to the note from Morgan Stanley.
Analyst concerns focused on order concentration and aftermarket access
Morgan Stanley strategists, including Max Yates, identified Siemens Energy as carrying "relatively higher risk" of disruption from events in the Middle East compared with peers in the sector. Their analysis singled out the Gas Services division, where the Middle East has been a major source of new orders and capacity additions driving 2026 market attention.
The bank's note emphasised that new orders - particularly within the Gas division - are a key performance indicator the market will be monitoring in 2026. In support of that emphasis, Morgan Stanley highlighted quarterly order data showing Saudi Arabia accounted for roughly 3.6 gigawatts of orders in Siemens Energy's fiscal second quarter of 2025 and about 4 gigawatts in the fiscal third quarter, each out of an approximate 9 gigawatts of orders received that quarter.
Using McCoy data cited in the note, Morgan Stanley estimated the Middle East made up 35% of Siemens Energy's 2025 new gas turbine unit order intake on a capacity basis. The company itself disclosed that its combined Middle East and Africa order exposure in 2025 amounted to €9 billion, representing 15% of its total orders. The analysts stated, "We assume the majority of this 15% will come from the Middle East (as opposed to Africa)."
Beyond initial orders, the bank flagged downstream risks to both the Gas and Grid businesses. Specifically, it warned that restricted access to customer sites could compress aftermarket revenues and postpone deliveries of equipment, which in turn could cause revenue slippage.
"Events in the Middle East remain fluid, but we think it unlikely that Siemens Energy's Gas Services orders, or revenues, will remain entirely unaffected," the analysts wrote.
Valuation and forecast shifts underpin the removal
The decision to drop Siemens Energy from the top picks list reflects a substantial shift in Morgan Stanley's expectations over the past year. Since the bank first elevated the company to top-pick status in March 2025, its 2028 group EBITA forecast has been revised up from €6.2 billion to €9 billion. At the same time, Morgan Stanley's assumption for the 2028 Gas Services EBITA margin has increased from 15% to 21%.
That upward revision in earnings assumptions has been mirrored by a re-rating of Siemens Energy's valuation versus European capital-goods peers. On a 2028 EV/EBITA basis, the stock's discount narrowed from 35% to a 10% premium. Still, Siemens Energy was noted to trade at a 38% discount to U.S. peer GE Vernova on the same metric - a gap Morgan Stanley partly attributed to Siemens Energy's greater Middle East exposure.
Despite the change in the top-pick status, the analysts continued to see a robust earnings trajectory for Siemens Energy, projecting an attractive group EBITA compound annual growth rate of 26% between 2026 and 2030 supported by a substantial backlog. However, they cautioned that the firm's 2028 EBITA forecast now sits only 3% ahead of consensus, which limits the potential for near-term upside surprises.
Market reaction and takeaway
Market response to the reassessment was reflected in the share-price movement on Friday. The note from Morgan Stanley balances a still-positive longer-term earnings view against near-term geopolitical risk, particularly concentrated in the Gas Services book where Middle Eastern orders and aftermarket access underpin a meaningful portion of recent intake.
For investors and market participants focusing on production rates, backlog conversion and aftermarket revenue exposure, Morgan Stanley's note underscores the sensitivity of Siemens Energy's near-term performance to events in the Middle East.