Siemens Healthineers Puts Diagnostics on the Operating Table as China Headwinds Bite

Siemens Healthineers is embarking on a radical restructuring, carving out its troubled lab diagnostics division while simultaneously slashing its full-year profit forecasts. The German medical technology group delivered second-quarter numbers that fell short of market expectations, with a deteriorating situation in China forcing management into a strategic rethink.

Revenue for the three months to March 2026 came in at €5.7 billion, but the headline figure masked a 3.9% nominal decline. Adjusted operating profit dropped 15% to €836 million, squeezing the margin to 14.7% from 16.6% a year earlier. Currency headwinds and tariff disruptions took a meaningful toll — without those drags, operating earnings would have shown solid growth.

The real damage, however, is concentrated in diagnostics. Comparable sales in the lab testing unit slumped 6.5% in the quarter, while its operating margin collapsed to just 0.9%. China is the culprit. The government’s “volume-based procurement” program — a state-driven initiative to squeeze pricing — has combined with weak demand to create what CFO Jochen Schmitz described as a “particularly challenging” environment. CEO Bernd Montag confirmed the legal separation of the diagnostics business is now underway, a process expected to take several months. Private equity firms have already tabled bids, though Schmitz stressed that all disposal options remain on the table.

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The knock-on effect on earnings has been severe. Adjusted earnings per share fell 6% to €0.53 in the quarter. Management has responded by trimming its full-year comparable revenue growth forecast to between 4.5% and 5.0%, down from the previous range of 5.0% to 6.0%. The adjusted EPS target has been cut to €2.20–€2.30, with the upper end lowered by €0.10. Additional supply chain inflation and tariff costs are expected to weigh on the second half to the tune of a mid-to-high double-digit million euro sum.

Not everything is broken. The imaging division, which accounts for the bulk of group profits, grew comparable sales by 6.1% and delivered a robust 22.4% margin. Nearly half of all MRI units shipped globally are now low-helium models, a technological edge that is filling the order book. Precision therapy, home to the Varian cancer treatment business, expanded by 4.7% in the quarter. These bright spots underscore why management wants to isolate diagnostics — the hope is that a leaner group, stripped of the underperforming unit, can command a higher valuation.

Investors are not waiting around to see how the story ends. The stock touched €33.71 on Thursday, a fresh 52-week low, before recovering slightly to €33.81 on Friday. The shares have now shed roughly 24% since the start of the year. Analyst sentiment, however, remains surprisingly resilient. Seventeen of 23 analysts rate the stock a buy or overweight. Barclays sticks with an “overweight” rating and a €55 price target, while Berenberg sees fair value at €54, citing long-term strength in imaging and radiation therapy. Jefferies is the most bullish at €60, implying upside of more than 70% from current levels.

The next major milestone comes in early 2027, when shareholders of both Siemens AG and Siemens Healthineers will vote on the final spin-off structure. Siemens AG plans to transfer roughly 30% of its stake to its own shareholders as part of the process. A banking syndicate has already been lined up to handle the refinancing, as the group’s net debt has risen noticeably in recent months. For now, the message from management is clear: diagnostics must be cut loose so the rest of the business can heal.

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