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Koninklijke Philips N.V. (PHG - Free Report) reported second-quarter 2023 adjusted earnings of 31 cents per share, beating the Zacks Consensus Estimate by 34.78%.
Revenues of $4.87 billion also beat the consensus mark by 13.04%.
In domestic currency, sales increased 7% on a year-over-year basis to €4.47 billion. Comparable sales (including adjustments for consolidation charges & currency effects) increased 9% year over year, primarily due to robust performance across the segments.
Comparable sales in the Diagnosis & Treatment business increased at a double-digit rate. Connected Care comparable sales grew mid-single-digit. Moreover, comparable sales in the Personal Health business witnessed low-single-digit growth on a year-over-year basis.
However, Philips’ comparable order intake declined 8% year over year in the reported quarter, primarily due to tough comparison. Both Diagnosis & Treatment and Connected Care businesses witnessed a high-single-digit decline.
Koninklijke Philips N.V. Price, Consensus and EPS Surprise
Sales increased 15% on a comparable basis in growth geographies. Sales in mature geographies were up 8% year over year on a comparable basis.
Philips shares fell 6.68% to close at $21.51 on Jul 24 following the results. Markedly, Philips shares have surged 43.5% year to date compared with the Zacks Medical sector’s decline of 1.9%.
Segmental Update
Diagnosis & Treatment revenues increased 9% from the year-ago quarter to €2.11 billion. Comparable sales increased 12% year over year, driven by double-digit growth in Ultrasound and Image-Guided Therapy, due to improved component supplies. Diagnostic Imaging recorded mid-single-digit growth.
Connected Care business revenues increased 4.2% year over year to €1.27 billion. Comparable sales increased 6%, primarily due to strong double-digit growth in Monitoring.
Personal Health’s revenues inched up 0.6% year over year to €836 million. Comparable sales increased 3% year over year, due to mid-single-digit growth in Personal Care.
Other segment sales amounted to €194 million, up €61 million on a year-over-year basis.
Operating Details
Gross margin expanded 240 basis points (bps) on a year-over-year basis to 43.9% in the reported quarter.
General & administrative expenses, as a percentage of sales, were unchanged at 3.5% on a year-over-year basis. Moreover, selling expenses decreased 180 bps to 24.9%. Research & development expenses declined 120 bps to 10.5%.
Restructuring, acquisition-related and other charges amounted to €161 million compared with €125 million in the year-ago quarter.
Operating model productivity savings amounted to €112 million, procurement savings amounted to €57 million, and other productivity programs delivered savings of €68 million, resulting in total savings of €237 million.
Philips’ adjusted earnings before interest, taxes and amortization (“EBITA”) — the company’s preferred measure of operational performance — jumped 109.7% year over year to €453 million. The EBITA margin expanded 500 bps on a year-over-year basis to 10.1% in the reported quarter.
Diagnosis & Treatment’s EBITA margins expanded 380 bps on a year-over-year basis to 10.6%, primarily due to higher sales.
Connected Care’s adjusted EBITA margins expanded 570 bps to 7.5%.
Personal Health’s adjusted EBITA margins expanded 100 bps on a year-over-year basis to 13.4%.
Balance Sheet
As of Jun 30, 2023, Philips’ cash and cash equivalents were €960 million and total debt was €8.22 billion. This compares with cash and cash equivalents of €1.13 billion and total debt of €8.18 billion as of Mar 31, 2023.
Operating cash flow was €135 million against the year-ago quarter’s operating cash outflow of €306 million.
Free cash flow was €5 million against the year-ago quarter’s free cash outflow of €488 million.
Guidance
Philips now expects to deliver mid-single-digit (up from low-single-digit) comparable sales growth and the upper end of the previously provided high-single-digit adjusted EBITA margin in 2023.
The Diagnosis & Treatment business is expected to witness high-single-digit growth while the Connected Care segment is expected to witness a mid-single-digit growth rate in 2023. Personal Health is expected to grow low single digits.
Philips still expects free cash flow between €700 million and €900 million for 2023.
Zacks Rank and Upcoming Earnings to Watch
Phillips currently sports a Zacks Rank #1 (Strong Buy).
Image: Bigstock
Philips (PHG) Q2 Earnings Beat Estimates, Revenue Rise Y/Y
Koninklijke Philips N.V. (PHG - Free Report) reported second-quarter 2023 adjusted earnings of 31 cents per share, beating the Zacks Consensus Estimate by 34.78%.
Revenues of $4.87 billion also beat the consensus mark by 13.04%.
In domestic currency, sales increased 7% on a year-over-year basis to €4.47 billion. Comparable sales (including adjustments for consolidation charges & currency effects) increased 9% year over year, primarily due to robust performance across the segments.
Comparable sales in the Diagnosis & Treatment business increased at a double-digit rate. Connected Care comparable sales grew mid-single-digit. Moreover, comparable sales in the Personal Health business witnessed low-single-digit growth on a year-over-year basis.
However, Philips’ comparable order intake declined 8% year over year in the reported quarter, primarily due to tough comparison. Both Diagnosis & Treatment and Connected Care businesses witnessed a high-single-digit decline.
Koninklijke Philips N.V. Price, Consensus and EPS Surprise
Koninklijke Philips N.V. price-consensus-eps-surprise-chart | Koninklijke Philips N.V. Quote
Sales increased 15% on a comparable basis in growth geographies. Sales in mature geographies were up 8% year over year on a comparable basis.
Philips shares fell 6.68% to close at $21.51 on Jul 24 following the results. Markedly, Philips shares have surged 43.5% year to date compared with the Zacks Medical sector’s decline of 1.9%.
Segmental Update
Diagnosis & Treatment revenues increased 9% from the year-ago quarter to €2.11 billion. Comparable sales increased 12% year over year, driven by double-digit growth in Ultrasound and Image-Guided Therapy, due to improved component supplies. Diagnostic Imaging recorded mid-single-digit growth.
Connected Care business revenues increased 4.2% year over year to €1.27 billion. Comparable sales increased 6%, primarily due to strong double-digit growth in Monitoring.
Personal Health’s revenues inched up 0.6% year over year to €836 million. Comparable sales increased 3% year over year, due to mid-single-digit growth in Personal Care.
Other segment sales amounted to €194 million, up €61 million on a year-over-year basis.
Operating Details
Gross margin expanded 240 basis points (bps) on a year-over-year basis to 43.9% in the reported quarter.
General & administrative expenses, as a percentage of sales, were unchanged at 3.5% on a year-over-year basis. Moreover, selling expenses decreased 180 bps to 24.9%. Research & development expenses declined 120 bps to 10.5%.
Restructuring, acquisition-related and other charges amounted to €161 million compared with €125 million in the year-ago quarter.
Operating model productivity savings amounted to €112 million, procurement savings amounted to €57 million, and other productivity programs delivered savings of €68 million, resulting in total savings of €237 million.
Philips’ adjusted earnings before interest, taxes and amortization (“EBITA”) — the company’s preferred measure of operational performance — jumped 109.7% year over year to €453 million. The EBITA margin expanded 500 bps on a year-over-year basis to 10.1% in the reported quarter.
Diagnosis & Treatment’s EBITA margins expanded 380 bps on a year-over-year basis to 10.6%, primarily due to higher sales.
Connected Care’s adjusted EBITA margins expanded 570 bps to 7.5%.
Personal Health’s adjusted EBITA margins expanded 100 bps on a year-over-year basis to 13.4%.
Balance Sheet
As of Jun 30, 2023, Philips’ cash and cash equivalents were €960 million and total debt was €8.22 billion. This compares with cash and cash equivalents of €1.13 billion and total debt of €8.18 billion as of Mar 31, 2023.
Operating cash flow was €135 million against the year-ago quarter’s operating cash outflow of €306 million.
Free cash flow was €5 million against the year-ago quarter’s free cash outflow of €488 million.
Guidance
Philips now expects to deliver mid-single-digit (up from low-single-digit) comparable sales growth and the upper end of the previously provided high-single-digit adjusted EBITA margin in 2023.
The Diagnosis & Treatment business is expected to witness high-single-digit growth while the Connected Care segment is expected to witness a mid-single-digit growth rate in 2023. Personal Health is expected to grow low single digits.
Philips still expects free cash flow between €700 million and €900 million for 2023.
Zacks Rank and Upcoming Earnings to Watch
Phillips currently sports a Zacks Rank #1 (Strong Buy).
Neogen (NEOG - Free Report) , Alkermes (ALKS - Free Report) and HCA Healthcare (HCA - Free Report) are some other top-ranked stocks worth considering in the same sector, each sporting a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Alkermes is scheduled to report its quarterly results on Jul 26. Both Neogen and HCA Healthcare are set to report their quarterly results on Jul 27.
Year to date, shares of NEOG, ALKS and HCA have gained 44.9%, 21.7%, and 18.8%, respectively.