Shares in German engineering group Siemens (SIEGY) rose on Thursday as it announced it would spin off its health care business and released quarterly and full-year results that beat expectations.
The spinoff decision comes as analysts predict that Siemens' health care business , the company's largest unit by revenue, will reap the benefits of a repeal by the incoming Trump Administration of President Obama's health care reforms. Jefferies analysts on Wednesday noted that the U.S. accounts for over half of the unit's business as they reiterated their buy rating on Siemens stock. Siemens calls the division Siemens Healthineers.
Siemens shares were up 3.5% in Frankfurt at €108.20.
Siemens reported an 18% rise in fourth-quarter net profit to €1.2 billion as revenue rose 3% to €22 billion. A closely watched measure of earnings that Siemens calls industrial profit was stable at just under €2.45 billion, more than the €2.41 billion consensus among analysts polled by Bloomberg. Full-year net profit came in at €5.6 billion, down from €7.4 billion, after fiscal 2015 results were flattered by disposal proceeds.
Siemens' results exceeded its own forecasts, which it had upgraded twice, and CEO Joe Kaeser declared that the figures were the company's best ever, after stripping out the impact of divestitures. The executive has been restructuring Siemens under a five-year plan to cut costs, simplify operations and focus on digital products, and has come under pressure in recent months to demonstrate his turnaround plan is working.
The health care spinoff -- for Kaeser didn't set a timeframe -follows the 2013 listing of Siemens' Osram Licht (OSAGF) lighting business . It's spun off a series of businesses in recent years, including semiconductor maker Infineon Technologies (IFNNY) in 2000.
"The public listing will give Healthineers even more focus and flexibility in pursuing its growth strategy," said Kaeser, who set up the unit as a standalone entity in 2014 as part of his "Vision 2020" revamp.
Analysts estimate that the business could be worth about $15 billion.
The health care business brought in €3.7 billion of fourth-quarter revenue, a rise of 2%, while profit was flat at €696 million. Its business lines include diagnostic imaging equipment, which Siemens said was a star performer in the quarter.
For fiscal 2017 Siemens warned of "headwinds for macroeconomic growth and investment sentiment in our markets due to the complex geopolitical environment."
It added, " Therefore, we expect modest growth in revenue, net of effects from currency translation and portfolio transactions."
It predicted a profit margin at its industrials business of between 10.5% and 11.5%, compared with the 10.9% margin it achieved in fiscal 2016.
Basic earnings per share will be between €6.80 and €7.20, compared with €6.74 in fiscal 2016, which included €0.23 from discontinued operations, Siemens forecast.
Siemens said its outlook assumes stabilization in the market environment for its "short-cycle" business lines and excludes regulatory and legal costs, a well as "potential burdens associated with pending portfolio matters. "