Morgan Stanley has taken Siemens Energy off its roster of top stock picks, a move that put pressure on the German industrial group’s shares even as the U.S. bank left its Overweight rating and a €166 price target unchanged. At the time of the note the stock was trading at €158.40.
The decision reflects Morgan Stanley analysts' view that Siemens Energy faces greater direct risk from disruptions in the Middle East than other European capital goods names covered by the bank. Their concern is concentrated in the company’s Gas Services business, where orders from the region have been a significant driver of new work.
In the fiscal second and third quarters of 2025, orders from Saudi Arabia represented roughly 3.6 gigawatts and 4 gigawatts respectively, out of about 9 gigawatts of orders in each quarter. Citing McCoy data, the bank noted that the Middle East accounted for 35% of Siemens Energy’s new gas turbine unit order intake in capacity terms in 2025. Siemens Energy itself disclosed that orders tied to the Middle East and Africa in 2025 amounted to €9 billion, equal to 15% of the company’s total order exposure.
Morgan Stanley warned that the risks extend beyond the flow of new orders. Restricted access to customer sites in the region could hurt aftermarket revenues and lead to delayed equipment deliveries, affecting both the Gas and Grid divisions. As the analysts put it, events in the Middle East remain fluid, but it seems unlikely that Siemens Energy’s Gas Services orders, or revenues, will remain entirely unaffected.
The bank’s move to remove the stock from its top-pick list also reflects a shift in expectations over the past year. When Morgan Stanley first elevated Siemens Energy to top-pick status in March 2025, its 2028 group EBITA forecast stood at €6.2 billion. That projection has since risen to €9 billion, and the bank’s assumed 2028 EBITA margin for Gas Services has climbed from 15% to 21%.
These improved earnings assumptions have been matched by a re-rating of the shares. Morgan Stanley calculates that Siemens Energy’s valuation on a 2028 EV/EBITA basis moved from a 35% discount to European capital goods peers to a 10% premium. That re-rating, coupled with the upgraded forecasts, has reduced the scope for further near-term positive surprises.
According to Morgan Stanley, the key metric the market will focus on in 2026 is new orders, notably in the Gas division. The analysts added that decisions on future orders from Middle Eastern governments could be deferred if those governments shift spending priorities toward defense, which would further impact order timetables.
Despite the cautionary tone, Morgan Stanley still anticipates robust longer-term growth at Siemens Energy. The bank continues to model an EBITA compound annual growth rate of 26% for the group between 2026 and 2030, driven in part by a large backlog of work. However, Morgan Stanley cautioned that its 2028 EBITA estimate now sits only 3% above consensus, leaving limited room for short-term upside surprises.
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