Innovative Imaging And Resilient Strategies Propel Future Profit Growth

Key Takeaways

• Siemens Healthineers anticipates EPS growth through margin expansion, operational improvements, and strategic innovations in Imaging and Diagnostics.
  
• Resilience in China and strong partnerships support stable long-term revenue growth, despite varying market conditions.
  
• Declining China revenues, diagnostic challenges, currency headwinds, and innovation reliance pose risks to Siemens Healthineers' revenue growth and profitability.

Catalysts

Through its subsidiaries, develops, manufactures, and sells a range of diagnostic and therapeutic products and services to healthcare providers worldwide.

• Siemens Healthineers expects significant EPS growth in fiscal year 2025, driven by healthy margin expansion in all segments, highlighting operational improvements that will positively impact earnings.
  
• Ongoing innovation in Imaging, particularly in photon-counting CT and MRI technologies, is expected to drive future growth, potentially increasing revenues by enabling new applications and entering new markets.
  
• The successful transformation program in Diagnostics, with identified efficiencies and a streamlined portfolio, promises further improvements in margins and profitability, enhancing net margins.
  
• The company has shown resilience and adaptability in its operations, especially in overcoming challenges in China, which sets a strong foundation for future revenue stabilization and growth as market conditions improve.
  
• Long-term partnerships and a robust order backlog position Siemens Healthineers for continued revenue growth, supporting the expectation of a mid to high single-digit revenue increase in the medium term.

Siemens Healthineers Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Siemens Healthineers's revenue will grow by 6.1% annually over the next 3 years.
• Analysts assume that profit margins will increase from 8.7% today to 12.2% in 3 years time.
• Analysts expect earnings to reach €3.3 billion (and earnings per share of €2.81) by about November 2027, up from €1.9 billion today. However, there is some disagreement amongst the analysts with the more bullish ones expecting earnings as high as €3.6 billion.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 24.2x on those 2027 earnings, down from 30.3x today. This future PE is lower than the current PE for the DE Medical Equipment industry at 38.1x.
• Analysts expect the number of shares outstanding to grow by 1.17% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 4.79%, as per the Simply Wall St company report.

Siemens Healthineers Future Earnings Per Share Growth

Risks

• The significant decline in revenues from China, despite overall growth, indicates sustained headwinds that could further impact revenue and margins if not resolved promptly.
  
• The Diagnostic segment, although showing some margin improvement, is facing challenges from volume-based procurement in China and legacy system transitions, which could lead to stagnant short-term growth and negatively affect overall earnings.
  
• Currency headwinds and geopolitical factors, such as potential tariffs, could impact international revenues and profit margins, particularly if trade tensions escalate.
  
• The reliance on innovation, such as photon-counting CT, requires continuous investment; any delays or failures to achieve widespread market adoption could impede revenue growth and profitability.
  
• While the U.S. market shows strength, a lack of significant policy changes or unexpected economic shifts could alter demand, potentially affecting future sales and earnings across segments.

Valuation

• The analysts have a consensus price target of €59.25 for Siemens Healthineers based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €65.9, and the most bearish reporting a price target of just €50.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2027, revenues will be €26.7 billion, earnings will come to €3.3 billion, and it would be trading on a PE ratio of 24.2x, assuming you use a discount rate of 4.8%.
  
• Given the current share price of €52.78, the analyst's price target of €59.25 is 10.9% 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.