Can Siemens Stock Trend Higher?

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With shares of Siemens (NYSE:SI) trading around $128, 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 health care. Siemens operates in six segments: industry, energy, health care, 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.

Siemens reported earnings results that showed losses, although those losses were less than analysts had been expecting. Siemens also announced a $5.4 billion share buyback that CEO Joe Kaeser believes will help make the European engineering company more profitable. Income from continuing operations dropped 13 percent to 1.08 billion euros and revenue fell 1.3 percent to 21.2 billion euros. Siemens raised its forecasts for the fiscal year, as Kaeser plans to raise the company’s profit margin to 10 percent of sales next year.

T = Technicals on the Stock Chart Are Strong

Siemens stock has struggled to make significant progress in recent years. However, the stock is currently trading near highs for the year. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Siemens is trading above its rising key averages, which signal neutral to bullish price action in the near-term.

SI

(Source: Thinkorswim)

Taking a look at the implied volatility (red) 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

21.11%

3%

1%

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

Put IV Skew

Call IV Skew

December Options

Flat

Average

January 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 very small amount of call and put option contracts and are leaning neutral to bullish over the next two months.

On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.

E = Earnings Are Mixed Quarter-Over-Quarter

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

2013 Q3

2013 Q2

2013 Q1

2012 Q4

Earnings Growth (Y-O-Y)

-12.50%

11.36%

-7.03%

-0.79%

Revenue Growth (Y-O-Y)

-1.29%

-10.15%

3.83%

2.24%

Earnings Reaction

2.09%*

0.44%

-1.08%

1.35%

Siemens has seen decreasing earnings and mixed revenue figures over the last four quarters. From these numbers, the markets have had conflicting feelings about Siemens’s recent earnings announcements.

* As of this writing

P = Weak Relative Performance Versus Peers and Sector

How has Siemens stock done relative to its peers, General Electric (NYSE:GE), ABB (NYSE:ABB), Phillips (NYSE:PHG), and sector?

Siemens

General Electric

ABB

Phillips

Sector

Year-to-Date Return

17.62%

29.16%

21.21%

31.91%

25.97%

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

Conclusion

Siemens provides a range of valuable technology products and services to a number of industries around the world. The company reported earnings that showed losses, although they were less then expected. The stock has struggled in recent years but is now trading near highs for the year. Over the last four quarters, earnings have been decreasing while revenues are mixed, which has produced conflicting feelings among investors in the company. Relative to its peers and sector, Siemens has been a weak year-to-date performer. WAIT AND SEE what Siemens does this quarter.

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