Philips Tumbles on Disappointing Profit, Growth at Health Unit

(Bloomberg) -- Philips (AS:LIGHT) shares tumbled the most in more than seven years after the Dutch health technology company’s third-quarter profit missed estimates and growth in the personal-health division was disappointing.

Key Insights

• The growth rate of Philips’s personal-health unit, which contributes the most to its profit, was 4 percent, in line with Chief Executive Officer Frans van Houten’s prediction of an improvement in the second half of 2018, yet falling short of an analysts’ expectation of 5.3 percent.
• “I would like it to be stronger as well,” the CEO said Monday. “I only said we delivered on our promise on the step-up we promised” from the previous quarter. He called the recovery slower than expected.
• Amsterdam-based Philips said an adverse impact of emerging-market currencies on sales was 60 basis points.
• In an interview with Bloomberg TV, the CEO said he’s considering price increases in some emerging markets due to currency weaknesses, citing places like Argentina. The Dutch company also wants to redesign its manufacturing footprint due to trade tensions.

Market Reaction

• The shares fell as much as 9.9 percent, the most intraday since June, 2011, and were trading down 7.1 percent to 32.23 euros at 9:04 a.m. in Amsterdam.
• The company missed estimates both on earnings and revenue, according to Bernstein analysts.

Know More

• The Dutch health-care technology company said in a statement that it’s third-quarter adjusted earnings before interest, taxes and amortization increased to 568 million euros from 532 million euros a year earlier. Analysts expected 584 million euros. Sales advanced to 4.3 billion euros, in line with the company-compiled estimate.
• Philips reiterated its targets for the 2017-2020 period of a 4-6 percent comparable sales growth and an average annual 100 basis points improvement in adjusted Ebita margin.
• In the third quarter, Philips reached a 4 percent sales growth, at the lower end of the guidance.
• “Despite emerging-market currency headwinds, margins should be supported by restructuring, improved sales for higher-priced imaging equipment, and a weaker euro versus the dollar in the second half of the year,” analysts of Bloomberg Intelligence said ahead of the earnings release.