Key Highlights
- Morgan Stanley maintained its Overweight rating and €166 price target while dropping Siemens Energy from preferred stock selections
- Analysts expressed concern over Gas Services division’s significant dependence on Middle Eastern contracts, especially Saudi Arabia
- Middle East markets represented 35% of gas turbine orders by capacity in 2025, with €9 billion in regional exposure
- Analysts cautioned about possible revenue postponements across Gas and Grid segments if regional site access becomes limited
- Despite maintaining a 26% EBITA growth projection through 2030, Morgan Stanley’s estimates now sit just 3% above market consensus
Shares of Siemens Energy tumbled more than 5% following Morgan Stanley’s decision to remove the German energy technology company from its preferred stock selections. The move reflects mounting worries over the firm’s substantial business ties to the Middle East amid escalating regional instability.
While maintaining an Overweight stance and keeping its €166 valuation unchanged, the American financial institution indicated that present geopolitical circumstances warrant a more conservative short-term outlook.
The primary issue centers on Siemens Energy’s Gas Services segment, which has shown substantial dependence on Middle Eastern market demand. Saudi Arabia individually represented approximately 3.6 gigawatts and 4 gigawatts of contracts during fiscal 2025’s second and third quarters, from total quarterly volumes of roughly 9 gigawatts.
Based on McCoy intelligence referenced by Morgan Stanley, Middle Eastern markets constituted 35% of Siemens Energy’s gas turbine order volume by capacity throughout 2025. The corporation has disclosed total Middle East and Africa order exposure standing at €9 billion — representing approximately 15% of its complete order portfolio.
Revenue Vulnerability Across Key Business Units
Beyond incoming orders, the investment bank highlighted possible revenue disruptions affecting both Gas and Grid operations. Should customer site accessibility become constrained, aftermarket service revenues might suffer while equipment shipments face postponement.
“Events in the Middle East remain fluid, but we think it unlikely that Siemens Energy’s Gas Services orders, or revenues, will remain entirely unaffected,” Morgan Stanley analysts wrote.
The financial institution identified an additional risk factor: should Middle Eastern governments reallocate budgets toward military spending, procurement decisions for gas turbines could experience delays.
This strategy shift illustrates the dramatic transformation in the stock’s investment narrative over recent months. Morgan Stanley initially designated Siemens Energy as its premier selection in March 2025. Subsequently, its 2028 group EBITA projection has surged from €6.2 billion to €9 billion, while Gas Services EBITA margin expectations have climbed from 15% to 21%.
The stock’s market valuation has mirrored this earnings upgrade trajectory. It has shifted from a 35% valuation discount versus European capital goods industry peers on a 2028 EV/EBITA basis to commanding a 10% premium.
Limited Upside Potential Following Valuation Expansion
This substantial revaluation constrains further appreciation opportunities. Morgan Stanley’s current 2028 EBITA projection now exceeds consensus estimates by merely 3% — a narrow differential that restricts potential for positive earnings surprises.
The investment bank identified incoming orders, particularly within the Gas division, as the critical performance indicator markets will monitor throughout 2026.
Morgan Stanley continues to project a 26% EBITA compound annual growth trajectory for Siemens Energy spanning 2026 through 2030, supported by substantial order backlog.
Siemens maintains a market capitalization of $175.88 billion, trades at a P/E ratio of 21.23, and carries a debt-to-equity ratio of 86.23.
