Siemens Jumps Into Rail Diagnostics With €1.2 Billion Mermec Bet as Record Backlog Nears €124 Billion

Siemens buys MERMEC's rail diagnostics assets for €1.2B, reaffirms Mobility division's role despite trimmed growth forecast. Shares hit record high as €6B buyback announced.

Siemens has fired a clear signal that its Mobility division remains a cornerstone of the group's future, even as the unit's growth expectations cool. The Munich-based industrial conglomerate agreed to acquire core assets of Italy's MERMEC Group, a specialist in rail-diagnostics trains and signalling technology, in a deal valued by people familiar with the transaction at roughly €1.2 billion. The acquisition, scheduled to close by the end of 2026, gives Siemens a stronger foothold in Italy's rail market and bolsters its own portfolio in inspection and measurement systems.

The purchase comes just as Mobility — the division supplying trains, signalling and rail services — trimmed its revenue-growth forecast to between 5 and 7 percent, down from a previous range of 8 to 10 percent. The MERMEC takeover alone will not reverse that slowdown, but it underscores management's determination to combine organic improvements with bolt-on acquisitions rather than retreat from the sector.

A Pivot Toward "ONE Tech Company"

The rail deal is one piece of a much broader structural overhaul. Siemens is pushing ahead with its "ONE Tech Company" strategy, which aims to unify business and functional areas under a leaner corporate roof. Digital Industries and Smart Infrastructure have already raised their full-year targets — Digital Industries now sees revenue growth of 7 to 10 percent with a margin of 17 to 19 percent, while Smart Infrastructure expects 8 to 10 percent top-line expansion. At the same time, the group is preparing to spin off its Healthineers medical-technology arm to shareholders. A vote is planned for 2027, with 30 percent of the subsidiary's shares to be transferred directly to Siemens investors, and the parent's long-term stake will be reduced to below 20 percent. The restructuring has drawn scrutiny from IG Metall, which has conditionally endorsed the strategy but insisted it must not lead to job cuts.

To back these moves, Siemens unveiled a share buyback programme of up to €6 billion, spread over as many as five years. The second quarter provided fresh fuel for the plan: free cash flow surged 71 percent to €1.716 billion. The order backlog hit a record €124 billion, a figure that underscores both the strength of the group's underlying demand and the long-term visibility in its electrification and automation businesses.

Analysts See Wide Gap Between Bulls and Bears

Investor enthusiasm following the quarterly results and the MERMEC news lifted Siemens shares to an all-time high of €275.75 on 25 May. The stock has since cooled slightly, trading at €268.75 — still up roughly 11.6 percent since the start of the year and about 12 percent above its 200-day moving average. Goldman Sachs raised its price target to €290 from €235, maintaining a "Buy" rating on expectations of stronger order intake and profit. Analyst Daniela Costa said her estimates for the 2027 fiscal year are "significantly above consensus."

Yet analysts remain sharply divided. The average of 23 targets sits at €274.85 — almost exactly where the stock currently trades. JPMorgan sees the highest potential at €335, while HSBC and Deutsche Bank anchor the low end at €210 and €255, respectively. The 125-euro spread reflects a fundamental disagreement over whether the growth rates in the industrial divisions are sustainable or whether the transformation will ultimately deliver the acceleration management promises.

Earnings Forecasts Suggest Room for Upside

For the current fiscal year 2026, the market expects Siemens to report earnings per share of €10.93, with a dividend of €5.65 — equivalent to a yield of roughly 2.1 percent. The company itself guided for adjusted EPS of €10.70 to €11.10. Looking to 2027, consensus EPS rises to €12.56, which would push the forward price-to-earnings ratio to about 21. The next major test for the stock comes with third-quarter results due this summer, when investors will see whether the twin engines of digital industry and smart infrastructure can keep the record backlog rolling into higher-margin revenue.