Send me real-time posts from this site at my email
Zacks

Philips' (PHG) Q2 Earnings Down on Supply Chain Constraints

Koninklijke Philips N.V. PHG reported second-quarter 2022 adjusted earnings of €0.14 per share, down 65% year over year.

Sales increased 1.3% on a year-over-year basis to €4.18 billion. Comparable sales (includes adjustments for consolidation charges & currency effects) decreased 7% year over year, primarily due to headwinds caused by global supply chain challenges and COVID lockdowns in China.

Comparable sales in the Diagnosis & Treatment and Personal Health businesses witnessed mid-single-digit increases on a year-over-year basis. The Connected Care business witnessed a double-digit decline.

Philips’ comparable order intake grew 1% year over year in the reported quarter. Diagnosis & Treatment businesses witnessed low-single-digit growth, while the Connected Care business witnessed a low-single-digit decline.

Sales decreased 18% on a comparable basis in growth geographies. Sales in mature geographies were down 2% year over year on a comparable basis.
 

Koninklijke Philips N.V. Price, Consensus and EPS Surprise

Koninklijke Philips N.V. price-consensus-eps-surprise-chart | Koninklijke Philips N.V. Quote

Philips’ shares were down more than 7% following second-quarter 2022 results. Markedly, Philips’ shares have dropped 44.2% year to date compared with the Zacks Medical-Products industry’s decline of 25.5%.

Segmental Update

Diagnosis & Treatment revenues increased 2% from the year-ago quarter to €2.16 billion. Comparable sales declined 4% year over year.

Enterprise Diagnostic Informatics revenues grew in the high-single-digit range. Image-Guided Therapy witnessed mid-single-digit growth in the reported quarter. However, Ultrasound and Diagnostic Imaging revenues declined due to specific electronic component shortages.

Connected Care business revenues declined 13% year over year to €1.06 billion. Comparable sales decreased 13%, primarily due to the consequences of the Respironics field action and the impact of supply chain headwinds.

Personal Health’s comparable sales were down 5%, with a low-single-digit decline in Oral Healthcare and Personal Care witnessing a high-single-digit decline.

Other segment sales amounted to €128 million, up €24 million on a year-over-year basis.

Operating Details

Gross margin contracted 90 basis points (bps) on a year-over-year basis to 41.4% in the reported quarter.

General & administrative expenses, as a percentage of sales, increased 20 bps on a year-over-year basis to 3.5%. Moreover, selling expenses increased 160 bps to 26.6%. Research & development expenses also increased 60 bps to 11.7%.

Restructuring, acquisition-related and other charges amounted to €125 million compared with €359 million in the year-ago quarter.

Philips’ adjusted earnings before interest, taxes and amortization (“EBITA”) — the company’s preferred measure of operational performance — declined 59.4% year over year to €216 million.

Diagnosis & Treatment’s EBITA margins contracted 700 bps on a year-over-year basis to 6.2%. Connected Care’s adjusted EBITA margin was 1.1% compared with 11.4% in the year-ago quarter.

Personal Health’s adjusted EBITA margins expanded 420 bps on a year-over-year basis to 12.4%.

Balance Sheet

As of Jun 30, 2022, Philips’ cash and cash equivalents were €1.26 billion and total debt was €8 billion. This compares with cash and cash equivalents of €1.44 billion and total debt of €7 billion as of Mar 31, 2022.

Guidance

Philips expects 2022 comparable sales growth between 1% and 3% (down from previous guidance between 3% and 5%). Adjusted EBITA margin is expected to be 10%, driven by 6-9% comparable sales growth in the second half of 2022.

For the 2023-2025 period, Philips expects 4-6% average annual comparable sales growth and an adjusted EBITA margin of 14-15%. Free cash flow is now expected to be roughly €2 billion by 2025.

Zacks Rank and Stocks to Consider

Phillips currently has a Zacks Rank #4 (Sell).

Acadia Healthcare ACHC, Alkermes ALKS and Molina Healthcare MOH are some better-ranked stocks worth considering in the same industry. While Alkermes sports Zacks Rank #1 (Strong Buy), both Acadia and Molina have Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Acadia, Alkermes and Molina are expected to report their quarterly results on Jul 27.

On a year-to-date basis, Acadia and Alkermes have returned 29.6% and 24.9%, respectively. However, shares of Molina are down 3.2% over the same timeframe.


This Little-Known Semiconductor Stock Could Lead to Big Gains for Your Portfolio

The significance of semiconductors can't be overstated. Your smartphone couldn't function without it. Your personal computer would crash in minutes. Digital cameras, washing machines, refrigerators, ovens. You wouldn't be able to use any of them without semiconductors.

Disruptions in the supply chain have given semiconductors tremendous pricing power. That's why they present such a tremendous opportunity for investors.

And today, in a new free report, Zacks' leading stock strategist is revealing the one semiconductor stock that stands to gain the most. It's yours free and with no obligation. 

>>Give me access to my free special report.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Koninklijke Philips N.V. (PHG): Free Stock Analysis Report
 
Alkermes plc (ALKS): Free Stock Analysis Report
 
Molina Healthcare, Inc (MOH): Free Stock Analysis Report
 
Acadia Healthcare Company, Inc. (ACHC): Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research

Welcome! Is it your First time here?

What are you looking for? Select your points of interest to improve your first-time experience:

Apply & Continue