Koninklijke Philips N.V. (PHG - Free Report) recently inked a $90-million strategic partnership with U.S.-based health institution Marin General Hospital. The agreement, extending over a period of 15 years, reflects Philips’ proactive efforts to expand its foothold in the North American health markets, as this is its third such partnership in the last six months.
Marin General Hospital, an independent community hospital in Marin County, aspires to transform health care standards for patients by leveraging Philip’s industry-leading medical technologies. These include Philips’ imaging systems, patient monitoring, telehealth and clinical informatics solutions, along with clinical education, consulting and design services. Featuring in the top 5% health institutions of the U.S., the hospital has announced a ground-breaking “hospital replacement project” and will open a state-of-the-art breast health center in 2016. Both moves are expected to further enhance Philip’s business prospects.
Of late, the U.S. healthcare markets are increasingly favoring strategic partnerships with leading healthcare companies in order to offer long-term patient value by reducing costs and risks. Philips, on its part, is vying for higher share in this lucrative market by lending its state-of-the-art digital health technologies to improve patient outcome of leading health institutions. Encouragingly, one of the hospitals, which were an early adopter of Philips’ services, recorded a 35% reduction in technology spending.
Company statistics show that Philips’s Healthcare segment has fared strongly over the past couple of quarters, recording 3% growth in comparable sales during the third quarter of 2015 aided by mid-single digit growth in Imaging systems, Healthcare Informatics, Solutions & Services and Customer Services. Some of the notable deals during this quarter include multiyear multi-vendor service agreement with the King's Daughters Medical Center in the U.S., a multi-year technology agreement with the Catharina Hospital and provision of Image-Guided Therapy technologies at the upcoming cardiovascular center of Dutch Catharina Hospital.
Going forward, national health expenditure is anticipated to rise. Also, senior citizens constitute the major customer base of healthcare services – they end up spending more on healthcare services compared with the average population. Hence, with expectation of a rising senior citizens’ population in the years ahead, we believe Philips has a strong upside potential, being well poised to capitalize on this expenditure trend of senior citizens. Moreover, given the relative immunity of health sector to macroeconomic problems, we believe Philips’ prospects in healthcare business shines bright.
Philips currently has a Zacks Rank #3 (Hold). Better-ranked stocks in the same sector include GigOptix, Inc. , Mistras Group, Inc. (MG - Free Report) and Macquarie Infrastructure Corporation (MIC - Free Report) . All three stocks sport a Zacks Rank #1 (Strong Buy).
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