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Koninklijke PhilipsN.V. (PHG - Free Report) reported third-quarter 2023 adjusted earnings of 36 cents per share, outpacing the Zacks Consensus Estimate by 100%.
Revenues of $4.87 billion also beat the consensus mark by 0.1%.
In domestic currency, sales increased 4% on a year-over-year basis to €4.47 billion. Comparable sales (including adjustments for consolidation charges & currency effects) rose 11% year over year. The upside was primarily attributed to robust performance across its segments.
Comparable sales in the Diagnosis & Treatment and Connected Care businesses witnessed double-digit growth year over year. Also, comparable sales in the Personal Health business recorded a high single-digit growth on a year-over-year basis.
However, Philips’ comparable order intake declined 9% year over year in the reported quarter primarily due to tough comparison. While Diagnosis & Treatment registered a double-digit fall, Connected Care business’ order intake was down by mid-single digit from the prior-year quarter.
Sales improved 12% on a comparable basis in growth geographies. Sales in mature geographies were up 11% year over year on a comparable basis.
Koninklijke Philips N.V. Price, Consensus and EPS Surprise
Diagnosis & Treatment revenues gained 6% from the year-ago quarter to €2.2 billion. Comparable sales jumped 14% year over year driven by double-digit growth in Ultrasound, Diagnostic Imaging and Image-Guided Therapy.
Connected Care revenues increased 3% year over year to €1.23 billion. Comparable sales climbed 10% primarily due to strong double-digit growth in Monitoring and mid-single-digit growth in Enterprise Informatics.
Personal Health revenues fell 0.4% year over year to €898 million. Nevertheless, comparable sales rose 7% year over year due to high-single-digit growth in Personal Care and Oral Healthcare.
Other segment sales amounted to €140 million, up 1.4% on a year-over-year basis.
Operating Details
Gross margin expanded 310 basis points (bps) on a year-over-year basis to 43.2% in the reported quarter.
General & administrative expenses, as a percentage of sales, were 3.4%, contracted 70 bps on a year-over-year basis. Moreover, selling expenses decreased 190 bps to 24.9%. Research & development expenses dipped 120 bps to 10.5%.
Further, research & development expenses of 10% (as a percentage of sales) contracted 420 bps year over year.
Restructuring, acquisition-related and other charges came in at €162 million compared with €303 million a year ago.
Operating model productivity, procurement and other productivity programs delivered savings of €142 million, €59 million and €57 million, respectively. This resulted in total savings of €258 million.
Philips’ adjusted earnings before interest, taxes and amortization (EBITA) — the company’s preferred measure of operational performance — jumped 118.7% year over year to €457 million. EBITA margin expanded 540 bps on a year-over-year basis to 10.2% in the reported quarter.
Diagnosis & Treatment’s adjusted EBITA margin extended 230 bps on a year-over-year basis to 12.7% primarily due to higher sales.
Connected Care’s adjusted EBITA margin was 3.7% in the reported quarter, jumped from (7.5%) in the year-ago quarter.
Personal Health’s adjusted EBITA margin expanded 460 bps on a year-over-year basis to 18.7%.
Balance Sheet
As of Sep 30, 2023, Philips’ cash and cash equivalents were €1.15 billion compared with €960 million as of Jun 30, 2023. Total debt was €8.16 billion compared with €8.22 billion as of Jun 30, 2023.
Operating cash flow was €489 million against the year-ago quarter’s operating cash outflow of €180 million.
Free cash flow was €333 million against the year-ago quarter’s free cash outflow of €374 million.
2023 Guidance
Philips expects to deliver 6-7% of comparable sales growth in 2023.
The Diagnosis & Treatment business is forecast to witness high-single-digit to double-digit growth. The Connected Care segment is suggested to register a low-single-digit to mid-single-digit growth. Personal Health is anticipated to grow low single digits.
Further, adjusted EBITA margin is expected in the band of 10-11%.
Philips still envisions free cash flow to be between €700 million and €900 million.
Zacks Rank & Stocks to Consider
Phillips currently carries a Zacks Rank #4 (Sell).
Image: Bigstock
Philips (PHG) Q3 Earnings Beat Estimates, Revenues Rise Y/Y
Koninklijke Philips N.V. (PHG - Free Report) reported third-quarter 2023 adjusted earnings of 36 cents per share, outpacing the Zacks Consensus Estimate by 100%.
Revenues of $4.87 billion also beat the consensus mark by 0.1%.
In domestic currency, sales increased 4% on a year-over-year basis to €4.47 billion. Comparable sales (including adjustments for consolidation charges & currency effects) rose 11% year over year. The upside was primarily attributed to robust performance across its segments.
Comparable sales in the Diagnosis & Treatment and Connected Care businesses witnessed double-digit growth year over year. Also, comparable sales in the Personal Health business recorded a high single-digit growth on a year-over-year basis.
However, Philips’ comparable order intake declined 9% year over year in the reported quarter primarily due to tough comparison. While Diagnosis & Treatment registered a double-digit fall, Connected Care business’ order intake was down by mid-single digit from the prior-year quarter.
Sales improved 12% on a comparable basis in growth geographies. Sales in mature geographies were up 11% year over year on a comparable basis.
Koninklijke Philips N.V. Price, Consensus and EPS Surprise
Koninklijke Philips N.V. price-consensus-eps-surprise-chart | Koninklijke Philips N.V. Quote
Segmental Update
Diagnosis & Treatment revenues gained 6% from the year-ago quarter to €2.2 billion. Comparable sales jumped 14% year over year driven by double-digit growth in Ultrasound, Diagnostic Imaging and Image-Guided Therapy.
Connected Care revenues increased 3% year over year to €1.23 billion. Comparable sales climbed 10% primarily due to strong double-digit growth in Monitoring and mid-single-digit growth in Enterprise Informatics.
Personal Health revenues fell 0.4% year over year to €898 million. Nevertheless, comparable sales rose 7% year over year due to high-single-digit growth in Personal Care and Oral Healthcare.
Other segment sales amounted to €140 million, up 1.4% on a year-over-year basis.
Operating Details
Gross margin expanded 310 basis points (bps) on a year-over-year basis to 43.2% in the reported quarter.
General & administrative expenses, as a percentage of sales, were 3.4%, contracted 70 bps on a year-over-year basis. Moreover, selling expenses decreased 190 bps to 24.9%. Research & development expenses dipped 120 bps to 10.5%.
Further, research & development expenses of 10% (as a percentage of sales) contracted 420 bps year over year.
Restructuring, acquisition-related and other charges came in at €162 million compared with €303 million a year ago.
Operating model productivity, procurement and other productivity programs delivered savings of €142 million, €59 million and €57 million, respectively. This resulted in total savings of €258 million.
Philips’ adjusted earnings before interest, taxes and amortization (EBITA) — the company’s preferred measure of operational performance — jumped 118.7% year over year to €457 million. EBITA margin expanded 540 bps on a year-over-year basis to 10.2% in the reported quarter.
Diagnosis & Treatment’s adjusted EBITA margin extended 230 bps on a year-over-year basis to 12.7% primarily due to higher sales.
Connected Care’s adjusted EBITA margin was 3.7% in the reported quarter, jumped from (7.5%) in the year-ago quarter.
Personal Health’s adjusted EBITA margin expanded 460 bps on a year-over-year basis to 18.7%.
Balance Sheet
As of Sep 30, 2023, Philips’ cash and cash equivalents were €1.15 billion compared with €960 million as of Jun 30, 2023. Total debt was €8.16 billion compared with €8.22 billion as of Jun 30, 2023.
Operating cash flow was €489 million against the year-ago quarter’s operating cash outflow of €180 million.
Free cash flow was €333 million against the year-ago quarter’s free cash outflow of €374 million.
2023 Guidance
Philips expects to deliver 6-7% of comparable sales growth in 2023.
The Diagnosis & Treatment business is forecast to witness high-single-digit to double-digit growth. The Connected Care segment is suggested to register a low-single-digit to mid-single-digit growth. Personal Health is anticipated to grow low single digits.
Further, adjusted EBITA margin is expected in the band of 10-11%.
Philips still envisions free cash flow to be between €700 million and €900 million.
Zacks Rank & Stocks to Consider
Phillips currently carries a Zacks Rank #4 (Sell).
Some better-ranked stocks in the broader technology sector are Dell Technologies (DELL - Free Report) , Applied Materials (AMAT - Free Report) and Arista Networks (ANET - Free Report) . While Dell Technologies sports a Zacks Rank #1 (Strong Buy), Applied Materials and Arista Networks carry a Zacks Rank #2 (Buy) each. You can see the complete list of today’s Zacks #1 Rank stocks here.
Dell Technologies shares have surged 68.8% in the year-to-date period. DELL’s long-term earnings growth rate is currently projected at 12%
Shares of Applied Materials have gained 58.1% in the year-to-date period. AMAT’s long-term earnings growth rate is currently anticipated at 6.10%.
Arista Networks shares have climbed 44.2% in the year-to-date period. ANET’s long-term earnings growth rate is currently pegged at 18.75%.