Will Siemens Stock Take Off With Proposed Changes?

With shares of Siemens (NYSE:SI) trading around $105, 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. Recently, Nokia (NYSE:NOK) 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.

Siemens also announced it will fire CEO Peter Loescher. Loescher’s expansions in green energy and expensive acquisitions have caused the board’s patience to run out, with officials asking for him to be fired at a meeting on Wednesday. Chief Financial Officer Joe Kaeser will likely replace the current CEO.

T = Technicals on the Stock Chart are Mixed

Siemens stock has struggled in the past few months. The stock is now trading in the middle of a price range that has remained intact for most of 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 between its key averages, which signal neutral price action in the near term.

SI

Source: Thinkorswim

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

24.19%

63%

62%

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

Put IV Skew

Call IV Skew

August Options

Flat

Average

September Options

Flat

Average

As of Monday, 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 significant 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. 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 Q2

2013 Q1

2012 Q4

2012 Q3

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 had mixed feelings about Siemens’s recent earnings announcements.

P = Weak Relative Performance Versus Peers and Sector

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

Siemens

ABB

General Electric

Phillips

Sector

Year-to-Date Return

-3.97%

5.77%

16.77%

20.36%

10.37%

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. A recent sell of the remaining investment in the Nokia Siemens Network is scheduled, as well as the sacking of its current CEO. The stock has not done very well in the past few months and is now trading in the middle of a price range that has remained intact for most of the year. Over the last four quarters, earnings and revenue figures have been mixed, which has produced mixed feelings among investors. Relative to its peers and sector, Siemens has been a poor year-to-date performer. WAIT AND SEE what Siemens does this coming quarter.

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