Morgan Stanley maintains Overweight on Siemens Energy AG, but 2Q full-results details are slightly negative

Overview

This report is Morgan Stanley's commentary on Siemens Energy AG's full 2Q26 results disclosure. Since the main financial figures had already been pre-released on April 23, investors shifted their focus to incremental details. The report argues that the new information was slightly negative overall, mainly because gas turbine commitments growth slowed and was not as strong as GE Vernova's increase in slot reservations. However, continued improvement in order pricing, strong free cash flow, the accelerated buyback plan, and the possibility of a new 2030 target still lead the analyst to maintain an Overweight view.

Core views

The core view is that the short-term details are slightly negative, but the long-term investment logic remains unchanged. On the negative side, Siemens Energy's total commitments rose to 87GW, but the QoQ increase was only 7GW, below the previous stage's 10GW, and slot reservations also did not meaningfully increase; the market may compare this with GE Vernova's larger QoQ improvement. On the positive side, gas order pricing continued to improve, with 12GW of new orders confirmed in 2Q26; although the GW volume was lower than the prior quarter, order value rose modestly, implying continued improvement in price per kW. In addition, the €6bn buyback plan is expected to be completed early in 2027, and the valuation still trades at a discount to GE Vernova.

Analysis framework

The report uses an event-driven framework to analyze incremental results disclosures: it first confirms that the 2Q26 financial results had already been pre-announced, then focuses on five newly disclosed areas in the full announcement, including gas commitments, gas order pricing, buyback progress, Gas Services service revenue, and free cash flow composition; it then compares commitments and valuation multiples with GE Vernova to judge the market's likely reaction and the relative valuation upside.

Methodology notes

• Valuation methodAverage of SOTP and DCF

  Target price derived as the average of two valuation approaches

  Morgan Stanley says the target price is the average of two methods: first, a 2028 SOTP that compares Gas Services, Grid Technologies, and Transformation of Industries with peers such as GE Vernova, Mitsubishi, and Hitachi, using 2028 EV/EBIT multiples with an average of about 19.4x; second, a DCF assuming a WACC of 7.8% and a perpetual growth rate of 2%.

• Research data conventionMorgan Stanley ModelWare

  Forecast data and financial metric convention

  The report notes that, unless otherwise stated, the relevant metrics are based on the Morgan Stanley ModelWare framework; some consensus data come from Refinitiv Estimates.

• Relative rating systemOverweight / Equal-weight / Underweight

  Total return judgment versus the industry coverage universe

  Overweight means that over the next 12 to 18 months, on a risk-adjusted basis, the stock's total return is expected to exceed the average total return of the analyst's industry coverage universe.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Siemens Energy AG (ENR1n.DE)

  The report's covered company and rating subject

  Strengths

  Gas order pricing continues to rise, the buyback plan is progressing faster than originally planned, a potential new 2030 target could further lift market expectations, and the valuation still trades at a discount to GE Vernova.

  Weaknesses

  QoQ growth in gas commitments slowed, slot reservations did not improve materially, and Gas Services service revenue was weak YoY.

  Comparison

  Siemens Energy's 2028 EV/EBITA is about 15.4x, below GE Vernova's 24.4x; ultimate-period commitments are about 87GW, below GE Vernova's roughly 100GW.

  Risks

  Execution risk on large projects, SGRE-related project risk, contract award delays, changes in the energy transition path, and continued slowing in service revenue growth.

• GE Vernova

  Peer comparison name

  Strengths

  Commitments rose more strongly this quarter, slot reservations increased noticeably, and this may provide stronger forward order visibility.

  Weaknesses

  Valuation is significantly higher than Siemens Energy's.

  Comparison

  GE Vernova's ultimate-period total commitments are about 100GW, higher than Siemens Energy's roughly 87GW; its 2028 EV/EBITA is about 24.4x, higher than Siemens Energy's roughly 15.4x.

  Risks

  At a high valuation, the market demands stronger order growth and pricing delivery.

Key data

• Stock ratingOverweightRating unchanged.
• Industry viewIn-LineIndustry View shown in the report table.
• Target price€200.00The latest target-price history shows 200 on Apr 27.
• Closing price€178.50May 11, 2026 closing price.
• Implied upsideApprox. 12.0%Estimated from the €200.00 target price and €178.50 closing price.
• Total commitments87GWIn 2Q26, commitments rose from 80GW in 1Q26 to 87GW, adding 7GW QoQ.
• Prior-stage commitments increase10GWIn the period from fiscal 4Q25 to 1Q26, commitments increased by 10GW, showing that the pace of improvement slowed this quarter.
• 2Q26 gas orders12GWBelow 1Q26's 13GW, but slightly higher in value terms.
• Change in order price per kWApprox. +10% QoQMorgan Stanley estimates that the new-order price per kW increased QoQ.
• Buyback planTotal €6bn, about €3bn completed in 2026The total buyback is expected to be completed one year early in 2027.
• Gas Services service revenueNominal -7%, organic -2% YoYWeak YoY, partly affected by the high 2025 base and the non-recurrence of large service projects.
• 2Q26 pre-tax free cash flow€1,975mnAlmost entirely driven by advance payments or contract liabilities.
• FY26 free cash flow guidance€8bnRaised from the prior €4-5bn.
• 2028 EV/EBITASiemens Energy 15.4x; GEV 24.4xThe report believes Siemens Energy trades at about a 37% discount to GEV.

Impact & implications

From an investment perspective, the market may in the short term focus more on the slowdown in gas commitments growth and the gap versus GE Vernova, so the full-results details could trigger a slight negative reaction. But over the medium term, improved order pricing, earlier completion of buybacks, potential additional buyback capacity, Grid margin improvement, and the possibility of a new 2030 target later this year could still support consensus earnings upgrades and a relatively constructive rating.

Risks

• A continued slowdown in gas commitments growth would weaken order visibility.
• Contract awards may be delayed by permitting processes, policy factors, or geopolitical issues.
• Large power generation projects and SGRE-related projects carry execution risk.
• If the coal-to-gas transition is replaced more quickly by a shift from coal to renewables, gas turbine demand could weaken.
• If Gas Services service revenue remains negative YoY, profit quality and growth sustainability could be affected.
• If strong free cash flow is mainly driven by advance payments, its sustainability will need continued validation.

What to watch

• Whether total commitments and slot reservations rebound to faster growth next quarter.
• Whether the new gas order price per kW continues to rise and whether the price gap versus GE Vernova narrows.
• Whether the company introduces a new 2030 target later this year and pushes consensus earnings higher.
• Whether the €6bn buyback plan is completed one year early in 2027 as expected, and whether a new buyback plan is announced.
• Whether Gas Services after-sales revenue can recover from YoY declines.
• Whether Grid Technologies margin improvement is delivered.
• The sustainability of advance payments within the FY26 free cash flow €8bn guidance.