Tariffs not enough to make Siemens Healthineers move production or raise prices—yet
Siemens Healthineers announced its second quarter earnings results May 7 which, despite the impact of tariffs, were surprisingly positive.
The U.S. trade war is having an impact on the company, but uncertainty over Trump administration policies has not convinced Siemens to move more production to the U.S. or raise prices. However, Siemens said it expects to see a much bigger effect in the months to come.
The Erlangen, Germany-based company also said it expects to spend between $227 million to $340 million on tariff mitigation efforts, which may reduce dividends from its stocks.
”We continued our strong start to the fiscal year in the second quarter. While the fundamental growth drivers remain intact, we expect that the significantly increased volatility of the geopolitical environment will weigh on our business this year. That leads us to widen our guidance range for adjusted basic earnings per share for fiscal 2025, while keeping our revenue growth outlook unchanged,” said Bernd Montag, CEO of Siemens Healthineers.
The good news for Siemens
Siemens' revenue for Q2 was $6.7 billion, 25% higher than Q2 2024. There was strong Q2 new order growth. Siemens' imaging segment grew the fastest by 9%, and the Varian radiation therapy segment saw order growth of 13%. Advanced therapies grew 4%, and diagnostics is on track for 6.3% growth, explained Montag.
"The demand in the U.S. is unbroken. There is a lot of procedure growth, there is continued building out of ambulatory centers. There also is an overall conviction that technology, and especially our kind of technology, is part of the solution to the challenge of doing more with less, of bringing efficiency to the health system," Montag said.
There were already growing pressures on the U.S. health system with more patients seeking care, a shortage of clinicians, reductions in reimbursement leading to cuts or the inability to hire more staff, he added. This has led many facilities to seek out technology to improve workflows and enable more patients to be examined in a shorter amount of time with fewer resources. Montag said there are now new pressures, with slashed healthcare funding for medical research and other proposed government cuts across healthcare. Siemens' newer systems have focused on efficiency and simplifying workflows, including the additional artificial intelligence (AI) built into its systems and software. This was the same message from Philips Healthcare during its earnings call, which also reported positive results despite tariff challenges.
"Imaging grew strongly. We saw particularly strong growth in molecular imaging, where new tracers for theranostics drove volumes in our U.S. PETNET business and in our computed tomography business," explained Jochen Schmitz, chief financial officer for Siemens Healthineers.
Revenue in the imaging segment rose 8.7% to almost $3.7 billion in the second quarter. Molecular imaging showed sharp growth, and computed tomography (CT) also saw strong results. Siemens released new photon-counting CT systems at different price points at Radiological Society of North America (RSNA) 2024, which are staring to see orders in 2025.
A big part of the positive North American results came from a $600 million, eight-year partnership deal with Alberta, Canada, to expand the province's ability too care for a growing number of patients with new imaging and radiotherapy treatment systems. The deal includes a significant volume of sales for new imaging and treatment systems, Siemens said.
Siemens also released new photon-counting CT systems at different price points at RSNA 2024, which are starting to impact CT orders.
"We are very happy with the progress," Montag said.
From a geographical perspective, imaging in the Americas region showed sharp growth. The Asia Pacific region's revenues rose slightly. Meanwhile, revenue in the China region declined slightly due to continued delays in customer orders. In the Europe, Middle East and Africa region, revenue declined slightly against strong growth in the prior year's same quarter.
"In Q2 we grew by nearly 7%, above the pace we have guided for the full year," Montag said.
Impact of tariffs on Siemens
"The geopolitical developments that occurred in the second quarter of fiscal year 2025 continue to persist. In particular, trade barriers and increased tariffs on a wide range of countries have a negative impact on our business development in fiscal year 2025," Siemens said in its Q2 earnings statement.
However, for fiscal year 2025, the company still expects comparable revenue growth of between 5% and 6% over last year. The picture of financial gains would have been even better if it were not for tariffs and the uncertainly over the U.S. trade war.
"Without the current tariff environment, we would have discussed the achievability of the upper end of the guidance ranges for revenue growth and adjusted earning per share." Montag said.
Instead, Siemens is taking a more cautious approach based on the unpredictable tariff economics, so it lowered the bottom end of its earnings per share (EPS) for its stock outlook range.
"We expect the net effect from tariffs on adjusted EPS, including mitigation, to range between $227 million to $340 million pre-tax for the second half," Schmitz said.
Siemens is planning the rest of the year based on the 10% U.S. imposed tariffs on European goods shipped to the U.S. remaining in place through July, and then after increasing to 20%. The company also is anticipating U.S. tariffs to remain in place for goods between Mexico, Canada and the U.S. and the tariffs for U.S. goods going into China.
"Currently, we do not produce all products in all regions," Montag explained, which means the company still needs to import parts or whole imaging systems from other countries into the U.S., or from its factories in the U.S. into China.
He said the company will watch Q4 closely, which is typically its busiest time in terms or orders. The increased volume of back and forth foreign trade will be the most heavily impacted by what are expected to be higher, 20% U.S. tariffs on goods from Europe being sent to the U.S.
Siemens not ready to move more production to the U.S.
Siemens produces complete imaging systems and components in Europe that are exported to the U.S. The current 10% tariffs on those exports make up more than 50% of the current tariff costs that are impacting Siemens, Schmitz said. The goal of the Trump administration is to use the tariffs as leverage to force companies to bring production jobs back into the U.S. in order to lower the cost of their products.
Siemens already has some production in the U.S. Operations in various countries are divided roughly by the amount of sales the company has in those regions, Siemens said. So the U.S. has about 30% of Siemens' workforce, Europe 40%, Asia 20% and China 10%.
Montag said changes can be made to that mix to shift production, but it would have to be seen an "economically meaningful" for the company to do so.
"That said, we do have a very strong footprint in the U.S. and see ourselves well positioned to adapt to changes in any tariff environment to come. However, these types of decisions are not taken overnight and the situation is still very much in flux. We need good visibility for such longer-term investments," Montag said.
Siemens has operations around the globe, allowing for diversification across many markets. Montag said the U.S. accounted for about 36% of revenues in 2024.
"The situation is still in flux, especially in regards to European goods going into the U.S. It is too early for larger structural transitions in terms of adapting out production footprint. But let me be clear, we would have all the means to mitigate the potential impacts from tariffs thanks to our existing global production footprint over the medium term," Montag said.
Schmitz said Siemens might implement smaller changes first to supply chains to lessen the impacts of tariffs, or look at selecting pricing changes. The company will also likely look more closely at its corporate costs and spending to make cuts if needed to compensate for higher tariffs. So far, he said Siemens has been cautious on raising prices as a tariff mitigation effort.
China does not want to harm its own health system
To some, U.S. trade war on China might seem like a good reason for China to more closely scrutinize U.S. to western companies operating in China, but Montag said that is not the case. He said China does not want to harm its own economy by pricing healthcare goods out of reach of its own health system, or negatively impacting foreign healthcare companies that production and R&D centers in China. He said Siemens has about 8,000 employees in China, including more than 1,000 involved in R&D.
"In regards to our industry, applying tariffs on the imports is not very useful, so the government is listening and taking action when it comes to exemptions," Montag explained. "It's not a great environment, but I do not feel that there is a danger of any retaliation measures that would have an impact on our business."
He added that while China has the potential to be a major market for the company, investments are not where the Siemens feels they could be. He said this spending there is partly being held back by the countries ongoing anti-corruption campaign. This is also being balanced with new economic stimulus funding, but Montag said this has been slow in coming, and Chinese consumers are hesitant about spending in the current economic climate.
Dave Fornell has covered healthcare for more than 17 years, with a focus in cardiology and radiology. Fornell is a 5-time winner of a Jesse H. Neal Award, the most prestigious editorial honors in the field of specialized journalism. The wins included best technical content, best use of social media and best COVID-19 coverage. Fornell was also a three-time Neal finalist for best range of work by a single author. He produces more than 100 editorial videos each year, most of them interviews with key opinion leaders in medicine. He also writes technical articles, covers key trends, conducts video hospital site visits, and is very involved with social media. E-mail: [email protected]