Siemens Positive on 2011 Growth (SI, GE)

Siemens AG (NYSE: SI) carries a market cap about half that of General Electric Co. (NYSE: GE), but the German conglomerate does not have a financing arm comparable to GE Capital. One area where the two companies do compete, almost head-to-head, is in their energy businesses. How have the two giants positioned themselves for 2011, and how do they each like their prospects?

Siemens reported earnings for its first quarter of fiscal 2011, ending December 31st, of $2.35 billion, up 16% from the same period a year ago. Revenue for the quarter was up 12%, to about $26.6 billion. In the company’s energy sector, revenue rose 19%  to about $12 billion. Profit in the energy sector was up 7% year-over-year to $826 million.

GE reported earnings for its fourth fiscal quarter last week. Revenue in the company’s energy infrastructure segment totaled $11 billion, down 3% from a year ago. Profit for the segment totaled $2.22 billion, down 2% from the same period last year.

GE’s oil & gas services’ results are included in the company’s energy infrastructure sector, and GE predicts that the oil & gas business will grow in 2011 and that the entire sector will return to profitability in 2011. Order backlog for at the end of the fourth quarter was up $25 billion, or 12% for the entire company. In the energy infrastructure sector, backlog was up $12.5 billion for both equipment and services, with services showing the largest gain.

At Siemens new orders grew by 19%, to nearly $31 billion in the first quarter. The company’s energy sector’s backlog grew by 27%, to about $12 billion.

New orders at Siemens rose fastest in emerging markets, up by 31% and emerging market orders accounted for 35% of total new orders in the quarter. The largest percentage change came from India, up more than 250%, from about $638 million to $1.66 billion. India and Asia combined for nearly 75% of Siemens new orders in the company’s Asia/Australia region.

For 2011, GE expects its operating earnings and revenue to rise about 5% on organic growth. Siemens expects 2011 operating earnings to rise by “at least 25% to 35%,” excluding legal and regulatory issues.

That’s a huge difference, and could be due partly to the fact that GE needs to ramp up its gas turbine sales again after a slow 2010. The US conglomerate also depends more heavily on wind turbine sales than does Siemens.

The German conglomerate expects 2011 profits in its power transmission and power distribution businesses to take a hit from increased marketing and sales expenses. These expenses are related to marketing and selling smart-grid technologies, and the company expects to spend more on promoting and selling these new alternative technologies. Fortunately, Siemens can fall back on its Fossil Power Generation business in coal- and gas-fired power plants to hold up its revenue and profits.

While GE is optimistic about its prospects in 2011, but Siemens appears to be euphoric. That’s worth keeping in mind.

Paul Ausick