Koninklijke Philips N.V. (PHG - Free Report) reported fourth-quarter 2020 adjusted earnings of €0.83 per share, up 13.3% year over year.
Sales increased 0.7% on a year-over-year basis to €6 billion. Comparable sales (includes adjustments for consolidation charges & currency effects) increased 7% year over year, primarily due to double-digit comparable sales growth in the Connected Care business, mid-single-digit growth in the Personal Health business and low-single-digit growth in the Diagnosis & Treatment businesses.
The company’s comparable order intake grew 7% year over year.
Sales increased 7% on a comparable basis in growth geographies, driven by double-digit growth in Central & Eastern Europe and Russia & Central Asia and high single-digit growth in Middle East & Turkey, partially offset by a decline in China. Comparable order intake declined mid-single digit.
Sales in mature geographies were up 6% year over year on a comparable basis. Western Europe witnessed 14% year-over-year growth and North America sales grew 1%.
Markedly, Philips’ shares have returned 14.1% to date against the Zacks Electronics- Miscellaneous Products industry’s rally of 22.8%.
Segmental Update
Diagnosis & Treatment revenues declined 5% from the year-ago quarter to €2.46 billion. Comparable sales inched up 1% year over year.
Diagnostic Imaging grew high-single digit. However, both Image-Guided Therapy and Ultrasound revenues declined mid-single digit due to COVID-19-led postponement of installations and elective procedures.
Comparable sales in growth geographies showed mid-single-digit growth, driven by double-digit growth in China and Central & Eastern Europe.
Mature geographies declined at a low-single-digit rate, reflecting mid-single-digit decline in North America. Western Europe witnessed low-single-digit growth.
Connected Care business revenues grew 17% to €1.58 billion. Comparable sales increased 24%, primarily driven by COVID-19-generated demand with double-digit growth in both Sleep & Respiratory Care and Monitoring & Analytics.
Mature geographies grew in double digits, primarily on double-digit growth in Western Europe and North America.
Growth geographies showed double-digit growth, driven by double-digit growth in Central & Eastern Europe, Russia & Central Asia, and Latin America, as well as high-single-digit growth in China.
Personal Health sales decreased 1% year over year to €1.82 billion. Comparable sales were up 5% with double-digit growth in Domestic Appliances, mid-single-digitgrowth in Personal Care and alow-single-digit growth in Oral Healthcare.
Growth geographies increased low-single digit, primarily due to double-digit growth in Middle East & Turkey, India, Latin America and Russia & Central Asia, partially offset by China. Mature geographies posted a high-single-digit sales growthdriven by double-digit growth in Western Europe.
Other segment sales dropped 19.8% to €138 million, primarily due to lower royalty income.
Operating Details
Gross margin expanded 230 basis points (bps) on a year-over-year basis to 47.8% in the reported quarter.
General & administrative expenses as percentage of sales increased 50 bps on a year-over-year basis to 2.9%. However, selling expenses decreased 50 bps to 21.2%. Research & development expenses also decreased 90 bps to 8.2%.
In the reported quarter, procurement cost savings totaled €67 million. Savings from overhead and other productivity programs were €56 million.
Philips’ adjusted earnings before interest, taxes and amortization (“EBITA”) — the company’s preferred measure of operational performance — were €1.14 billion, up 6.8% from the year-ago quarter.
Adjusted EBITA margin expanded 110 bps on a year-over-year basis to 19%. COVID-19 negatively impacted adjusted EBITA by roughly 40 bps.
Diagnosis & Treatment EBITA margins contracted 230 bps on a year-over-year basis to 14%. Moreover, Personal Health adjusted EBITA margins contracted 10 bps.
Connected Care adjusted EBITA margin improved to 27.2% compared with 19.4% in the year-ago quarter.
Balance Sheet & Other Details
As of Dec 31, 2020, Philips’ cash and cash equivalents were €3.27 billion and total debt was €6.93 billion. This compares with cash and cash equivalents of €2.49 billion and total debt of €7.23 billion as of Sep 30, 2020.
Meanwhile, net cash flow generated from operating activities came in at €2.78 billion, up 36.7% year over year. Free cash flow was €1.85 billion, compared with €1.05 billion in the year-ago quarter.
Guidance
For 2021, Philips plans to deliver low-single-digit comparable sales growth, driven by solid growth in Diagnosis & Treatment and Personal Health, partly offset by lower Connected Care sales. Adjusted EBITA margin is expected to improve 60-80 bps.
For 2021-2025, Philips targets average annual comparable sales growth in the 5-6% range.
Adjusted EBITA margin is expected to expand 60-80 bps on average annually between 2021 and 2025 timeframe.
Moreover, free cash flow is expected to be above €2 billion by 2025.
Zacks Rank and Other Stocks to Consider
Phillips currently sports a Zacks Rank #2 (Buy).
Littelfuse (LFUS - Free Report) , Kulicke&Soffa (KLIC - Free Report) and Knowles (KN - Free Report) are better-ranked stocks worth considering from the broader computer and technology sector. All the three stocks flaunt a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Moreover, while Littelfuse is set to report their quarterly results on Feb 3, both Kulicke&Soffa and Knowles are scheduled to report the same on Feb 4.
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Koninklijke Philips N.V. (PHG - Free Report) reported fourth-quarter 2020 adjusted earnings of €0.83 per share, up 13.3% year over year.
Sales increased 0.7% on a year-over-year basis to €6 billion. Comparable sales (includes adjustments for consolidation charges & currency effects) increased 7% year over year, primarily due to double-digit comparable sales growth in the Connected Care business, mid-single-digit growth in the Personal Health business and low-single-digit growth in the Diagnosis & Treatment businesses.
The company’s comparable order intake grew 7% year over year.
Sales increased 7% on a comparable basis in growth geographies, driven by double-digit growth in Central & Eastern Europe and Russia & Central Asia and high single-digit growth in Middle East & Turkey, partially offset by a decline in China. Comparable order intake declined mid-single digit.
Sales in mature geographies were up 6% year over year on a comparable basis. Western Europe witnessed 14% year-over-year growth and North America sales grew 1%.
Markedly, Philips’ shares have returned 14.1% to date against the Zacks Electronics- Miscellaneous Products industry’s rally of 22.8%.
Segmental Update
Diagnosis & Treatment revenues declined 5% from the year-ago quarter to €2.46 billion. Comparable sales inched up 1% year over year.
Diagnostic Imaging grew high-single digit. However, both Image-Guided Therapy and Ultrasound revenues declined mid-single digit due to COVID-19-led postponement of installations and elective procedures.
Comparable sales in growth geographies showed mid-single-digit growth, driven by double-digit growth in China and Central & Eastern Europe.
Mature geographies declined at a low-single-digit rate, reflecting mid-single-digit decline in North America. Western Europe witnessed low-single-digit growth.
Connected Care business revenues grew 17% to €1.58 billion. Comparable sales increased 24%, primarily driven by COVID-19-generated demand with double-digit growth in both Sleep & Respiratory Care and Monitoring & Analytics.
Mature geographies grew in double digits, primarily on double-digit growth in Western Europe and North America.
Growth geographies showed double-digit growth, driven by double-digit growth in Central & Eastern Europe, Russia & Central Asia, and Latin America, as well as high-single-digit growth in China.
Personal Health sales decreased 1% year over year to €1.82 billion. Comparable sales were up 5% with double-digit growth in Domestic Appliances, mid-single-digitgrowth in Personal Care and alow-single-digit growth in Oral Healthcare.
Growth geographies increased low-single digit, primarily due to double-digit growth in Middle East & Turkey, India, Latin America and Russia & Central Asia, partially offset by China. Mature geographies posted a high-single-digit sales growthdriven by double-digit growth in Western Europe.
Other segment sales dropped 19.8% to €138 million, primarily due to lower royalty income.
Operating Details
Gross margin expanded 230 basis points (bps) on a year-over-year basis to 47.8% in the reported quarter.
General & administrative expenses as percentage of sales increased 50 bps on a year-over-year basis to 2.9%. However, selling expenses decreased 50 bps to 21.2%. Research & development expenses also decreased 90 bps to 8.2%.
In the reported quarter, procurement cost savings totaled €67 million. Savings from overhead and other productivity programs were €56 million.
Philips’ adjusted earnings before interest, taxes and amortization (“EBITA”) — the company’s preferred measure of operational performance — were €1.14 billion, up 6.8% from the year-ago quarter.
Adjusted EBITA margin expanded 110 bps on a year-over-year basis to 19%. COVID-19 negatively impacted adjusted EBITA by roughly 40 bps.
Diagnosis & Treatment EBITA margins contracted 230 bps on a year-over-year basis to 14%. Moreover, Personal Health adjusted EBITA margins contracted 10 bps.
Connected Care adjusted EBITA margin improved to 27.2% compared with 19.4% in the year-ago quarter.
Balance Sheet & Other Details
As of Dec 31, 2020, Philips’ cash and cash equivalents were €3.27 billion and total debt was €6.93 billion. This compares with cash and cash equivalents of €2.49 billion and total debt of €7.23 billion as of Sep 30, 2020.
Meanwhile, net cash flow generated from operating activities came in at €2.78 billion, up 36.7% year over year. Free cash flow was €1.85 billion, compared with €1.05 billion in the year-ago quarter.
Guidance
For 2021, Philips plans to deliver low-single-digit comparable sales growth, driven by solid growth in Diagnosis & Treatment and Personal Health, partly offset by lower Connected Care sales. Adjusted EBITA margin is expected to improve 60-80 bps.
For 2021-2025, Philips targets average annual comparable sales growth in the 5-6% range.
Adjusted EBITA margin is expected to expand 60-80 bps on average annually between 2021 and 2025 timeframe.
Moreover, free cash flow is expected to be above €2 billion by 2025.
Zacks Rank and Other Stocks to Consider
Phillips currently sports a Zacks Rank #2 (Buy).
Littelfuse (LFUS - Free Report) , Kulicke&Soffa (KLIC - Free Report) and Knowles (KN - Free Report) are better-ranked stocks worth considering from the broader computer and technology sector. All the three stocks flaunt a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Moreover, while Littelfuse is set to report their quarterly results on Feb 3, both Kulicke&Soffa and Knowles are scheduled to report the same on Feb 4.
Just Released: Zacks’ 7 Best Stocks for Today
Experts extracted 7 stocks from the list of 220 Zacks Rank #1 Strong Buys that has beaten the market more than 2X over with a stunning average gain of +24.4% per year.
These 7 were selected because of their superior potential for immediate breakout.
See these time-sensitive tickers now >>
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
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