Will Siemens See Higher Prices?

Stock Market

With shares of Siemens (NYSE:SI) trading around $104, is SI an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our Cheat Sheet investing framework:

T = Trends for a Stock’s Movement

Siemens is an integrated technology company with activities in the fields of industry, energy and healthcare. Siemens operates in six segments: industry, energy, healthcare, equity investments, Siemens IT solutions and services, and Siemens financial services. The company has equity investments in telecommunications infrastructure and household appliance companies, as well as in a company that provides open communications, network, and security solutions. Recently, Nokia (NYSE:NOK) has announced it will acquire the remaining stake it doesn’t already own in the Nokia Siemens Network. Nokia is buying Siemens’s 50 percent of the network for a lower-than-expected 1.7 billion euros. Both stocks seem to be taking the news positively.

T = Technicals on the Stock Chart are Mixed

Siemens stock has not made much progress in the past several years. The stock is now in a consolidation range that extends to the beginning of the year. Analyzing the price trend and its strength can be done using key simple moving averages: 50-day (pink), 100-day (blue), and 200-day (yellow). As seen in the daily price chart below (source: Thinkorswim), Siemens is trading slightly below its key averages, which signals neutral to bearish price action in the near term.

SI

Taking a look at the implied volatility and implied volatility skew levels of Siemens options may help determine if investors are bullish, neutral, or bearish.

Implied Volatility (IV)

30-Day IV Percentile

90-Day IV Percentile

Siemens Options

20.68%

33%

30%

What does this mean? This means that investors or traders are buying a small amount of call and put options contracts, as compared to the last 30 and 90 trading days.

Put IV Skew

Call IV Skew

July Options

Flat

Average

August Options

Flat

Average

As of today, there is an average demand from call buyers or sellers, and low demand by put buyers or high demand by put sellers, all neutral to bullish over the next two months. To summarize, investors are buying a small amount of call and put option contracts and are leaning neutral to bullish over the next two months.

E = Earnings Are Mixed Quarter-Over-Quarter

Rising stock prices are often strongly correlated with rising earnings and revenue growth rates, and the last four quarterly earnings announcement reactions help gauge investor sentiment on Siemens’s stock. What do the last four quarterly earnings and year-over-year revenue growth figures for Siemens look like and, more importantly, how did the markets like these numbers?

2013 Q1

2012 Q4

2012 Q3

2012 Q2

Earnings Growth (Y-O-Y)

11.36%

-7.03%

-0.79%

54.97%

Revenue Growth (Y-O-Y)

-10.15%

3.83%

2.24%

-5.11%

Earnings Reaction

0.44%

-1.08%

1.35%

-0.62%

Siemens has seen mixed earnings and revenue figures over the last four quarters. From these numbers, the markets have been on the fence about Siemens’s recent earnings announcements.

P = Weak Relative Performance Versus Peers and Sector

How has Siemens’s stock done relative to its peers – ABB (NYSE:ABB), General Electric Co. (NYSE:GE), Royal Phillips (NYSE:PHG) — and sector?

Siemens

ABB

General Electric

Royal Phillips

Sector

Year-to-Date Return

-4.91%

5.39%

12.48%

4.45%

4.47%

Siemens has been a poor relative performer, year-to-date.

Conclusion

Siemens provides technology products and services in a wide range of industries worldwide. A recent sell of the remaining investment in the Nokia Siemens Network is scheduled and it seems as if the markets are content with this move. The stock has struggled in recent years, and it is part of a value range extending to the beginning of the year. In the past four quarters, investors in the company have been on the fence as earnings and revenue figures have been mixed. Relative to its peers and sector, Siemens has been a poor year-to-date performer. WAIT AND SEE what Siemens does in coming quarters.

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