Decarbonization And Electrification Will Drive Renewable Energy Momentum

Key Takeaways

• Exceptional order growth, margin expansion, and global diversification position Siemens Energy for substantial, sustained gains in market share, revenue, and profitability.
  
• Leadership in emerging technologies and wind business transformation will unlock new high-margin growth streams and drive a significant turnaround in group earnings.
  
• Persistent quality and execution risks, geopolitical headwinds, intensifying competition, and volatility in subsidized renewables jeopardize Siemens Energy's profitability, margins, and earnings predictability.

Catalysts

Operates as an energy technology company worldwide.

• Analysts broadly agree Siemens Energy's record order backlog and high revenue coverage signal growth, but the magnitude may be understated: unprecedented 65% order intake growth and a diversified, global pipeline indicate the company is positioned not just for stability, but for market share gains and consistent, outsized revenue growth far beyond visible backlog conversion.
  
• While analyst consensus highlights better margin quality in future orders, the recent quarter's 450 basis point margin improvement and over tenfold profit growth show that margin expansion is not just likely, but accelerating due to Siemens Energy's discipline in pricing, mix shift towards higher-margin grid and services, and scale in project execution-supporting a rapid and sustained uplift in net margins and earnings.
  
• The explosive increase in demand for grid technologies, data center-related gas turbines, and energy infrastructure modernization-driven by the global push for electrification and energy security-creates structural, multi-year growth opportunities; Siemens Energy's capacity expansions and supply chain initiatives will enable revenue and profitability to scale well above current market forecasts.
  
• Siemens Energy's leadership investments and early-mover status in hydrogen-ready turbines, power-to-X, and small modular reactors position the firm to dominate emerging decarbonization segments-opening up entirely new, high-margin revenue streams that are not yet factored into consensus earnings models.
  
• The wind business transformation is likely to deliver a sharper-than-expected earnings turnaround: onshore and offshore product launches, a rigorous cost-out program, and a massive pipeline of preferred bidder status projects could rapidly return this segment to sustained profitability, becoming a net contributor to group earnings as decarbonization auctions and EU/US policy tailwinds accelerate.

Siemens Energy Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Siemens Energy compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Siemens Energy's revenue will grow by 12.8% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 2.5% today to 9.1% in 3 years time.
• The bullish analysts expect earnings to reach €5.0 billion (and earnings per share of €5.82) by about August 2028, up from €954.0 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 34.5x on those 2028 earnings, down from 76.0x today. This future PE is lower than the current PE for the DE Electrical industry at 37.7x.
• Analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.5%, as per the Simply Wall St company report.

Siemens Energy Future Earnings Per Share Growth

Risks

• Persistent quality issues and warranty costs in the Siemens Gamesa wind business remain a material risk, with €120 million in quality-related cash outs this quarter and a full-year expectation of mid-triple-digit millions, which could continue to weigh on net margins and overall group earnings.
  
• High project complexity, especially in large-scale grid, HVDC, and gas turbine installations, exposes Siemens Energy to execution risks such as cost overruns, delayed revenue recognition, and negative free cash flow, which could increasingly impact free cash flow and profitability as backlogs grow.
  
• Exposure to geopolitical risks and protectionist policies is intensifying, with tariffs already resulting in €100 million of profit impact in Q3 and further profit headwinds expected from EU-U.S. tariff hikes, potentially affecting both operating margins and revenue over the longer term if trade barriers escalate.
  
• The competitive landscape is intensifying, as the company itself notes pricing pressures may start to normalize and there are increasing risks of margin compression from emerging market and Asian competitors, which may erode future margins and market share.
  
• Overexposure to subsidized and volatile renewable markets, where Siemens Energy's backlog and growth is concentrated, could lead to unpredictable earnings and potential impairments if renewable subsidies are withdrawn or delayed more quickly than expected, thereby reducing both top-line revenue growth and net income stability.

Valuation

• The assumed bullish price target for Siemens Energy is €147.73, which represents two standard deviations above the consensus price target of €90.88. This valuation is based on what can be assumed as the expectations of Siemens Energy's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €160.0, and the most bearish reporting a price target of just €37.0.
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be €55.2 billion, earnings will come to €5.0 billion, and it would be trading on a PE ratio of 34.5x, assuming you use a discount rate of 6.5%.
• Given the current share price of €91.76, the bullish analyst price target of €147.73 is 37.9% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.