Tickers in this Article: SI, PHG, GE, ABB, VAR, EMR, HON
The last year or two has seen a fairly remarkable rebound in sales, orders and profits for major industrial companies around the world. With a shareholder update Tuesday morning, German conglomerate Siemens (NYSE:SI) has started waving the caution flag. While none of what Siemens said suggests that another global (or even regional) recession is in the making, it does largely confirm that the easy days of the recovery are over and further growth is going to have to come from the more difficult "blocking and tackling" that ultimately separates the long-term winners and losers.

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Siemens' Update Short on Details and Long on Influence
Siemens offered an update to investors that essentially revealed that the company expects revenue to be flat sequentially and up from last year, with profits down sequentially and also up from last year. Order growth is slowing, and management believes that most of the tailwind of the economic rebound is now done.

Going into some of the details, Siemens indicated that the health care and renewable energy businesses are underperforming, lighting is challenging, and the industrial markets are still relatively healthy.

Extrapolating to the Comparables
Siemens certainly does not operate in a bubble, so whatever Siemens is seeing in the markets is relevant to several other companies. Philips (NYSE:PHG) gave a profit warning to the Street last week, and Siemens' comments would seem to corroborate the idea that the lightning market is weak.

Going a step further, if Siemens is seeing weakness in its renewable energy markets, that is relevant to the likes of General Electric (NYSE:GE), and perhaps to smaller players like Vestas, SunPower (Nasdaq:SPWRA) and Suntech (NYSE:STP). It may also represent some increasing challenges for ABB (NYSE:ABB), as that industrial conglomerate looks for better results from its power and energy business units.

Siemens' comments on its health care business are interesting. Over the past couple of quarters there have been better signs of life in the "big iron" segments of health care, but Siemens' news could indicate that this just a temporary rebound driven by replacement demand that was delayed by the recession. If the market for big-ticket health care equipment is still soft, that has implications for the conglomerates GE and Philips, but also diagnostics, oncology, and monitoring companies like Varian (NYSE:VAR), Hologic (Nasdaq:HOLX) and Covidien (NYSE:COV). That, in turn, could have implications for smaller and faster-growing companies like Volcano (Nasdaq:VOLC) and Masimo (Nasdaq:MASI), as well as Intuitive Surgical (Nasdaq:ISRG).

A Longer Run For Industrials?
Siemens did not seem as troubled by its industrial or transportation businesses. Transport was certainly helped by a large order from Deutsche Bahn, but strong conditions overall would be good news for GE, Bombardier and Alstom. Still, it is worth wondering how strong the public transport market can be right now - if countries are seeing their fiscal budgets come under strain and are pulling back on support for renewable energy, can trains be too far behind?

Looking at the industrials, Siemens did not seem to have much to say beyond the fact that Germany was still looking pretty strong. If Siemens' industrial markets are still healthy, that's encouraging news for the likes of ABB, Emerson (NYSE:EMR), Honeywell (NYSE:HON), United Technologies (NYSE:UTX), and Rockwell Automation (NYSE:ROK). By the same token, the same rules apply - these companies have gorged on pent-up demand from the credit crisis and the recession and that the levels of sales seen over the past year or two has to have largely mopped up a lot of that latent demand. Given that Siemens did not go out of its way to say that industrial demand and orders were still exceptionally strong, reading between the lines would suggest that growth is normalizing.

The Bottom Line
The last few weeks have seen investors reset their expectations for many companies and industries, Siemens included. Siemens' stock has had a good run through this recovery, but it still does not look all that expensive. Provided that there is enough demand out there to support mid-single-digit revenue growth and that the company can continue to drive some operating improvements, Siemens is worth a look even if the recovery is long in the tooth. (For more, see The 6 Signs Of An Economic Recovery.)

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