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Philips (PHG) Set to Acquire Capsule Technologies for $635M

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Koninklijke Philips (PHG - Free Report) recently announced that it has inked an agreement to acquire Andover, MA-based Capsule Technologies for $635 million (roughly €530 million). The transaction is expected to be completed in the first quarter of 2021.

Capsule is a leading provider of medical device integration and data technologies for hospitals and healthcare organizations. The company serves more than 2,800 hospitals and healthcare organizations in 40 countries across the world.

Capsule’s vendor-neutral SaaS-based Medical Device Information Platform will help Philips improve its patient care management solutions for all care settings in hospitals, as well as during remote patient care.

Undoubtedly, the deal will expand Philips’ total addressable market and customer base. Moreover, it will add more than $100 million to Philips’ top line in terms of SaaS and licensing revenues. In fact, the buyout is expected be accretive to Philips’ sales growth and adjusted EBITA margin in 2021.

Philips Solid Portfolio to Aid Prospects

Philips shares have returned 8.2% in the past year, underperforming the Zacks Electronics - Miscellaneous Products industry’s return of 17.6%.

The company has been suffering from weakness in the Personal Health business, which is expected to remain sluggish due to uncertain consumer demand and slower pace of recovery in China.

Nevertheless, Philips is benefiting from strong demand for patient monitors, hospital ventilators, computed tomography and portable ultrasound systems.

Moreover, increased interest in telehealth solutions like tele-ICU, tele-radiology and tele-pathology, which help virtual working and collaboration of healthcare professionals, bode well for Philips.

Further, a widening product portfolio is adding to customer strength. Additionally, an expanding partner base strengthens prospects. Philips also remains on track to deliver over €400 million in productivity savings.

Moreover, the pending acquisition of BioTelemetry is a key catalyst. The integration of BioTelemetry’s cardiac diagnostics and monitoring solutions with Philips’ existing portfolio, which includes real-time patient monitoring, therapeutic devices, telehealth and informatics, will drive the expansion of Philips’ cardiac care portfolio.

Zacks Rank & Other Stocks to Consider

Philips currently sports a ZacksRank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Micron (MU - Free Report) , NetApp (NTAP - Free Report) and Shopify (SHOP - Free Report) are three other stocks in the broader computer & technology sector having the same Zacks Rank as of Philips.

Long-term earnings growth rate for Micron, NetApp and Shopify are 12.7%, 11.9% and 32.5%, respectively.

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Each was hand-picked by a Zacks expert as the #1 favoritestock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

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