Koninklijke Philips Electronics N.V.
) returned to profitability in the second quarter 2012 against a
loss in the year-ago quarter, sending earnings estimates higher
over the past 30 days. Cost reduction plans and innovative product
launches should add to the company's growth strategy and work in
its favor. With an 18.2% gain in the share price since last June,
this Zacks #2 Rank (Buy) electronics manufacturer looks like a
solid growth pick.
On July 23, Philips reported second quarter 2012 net income of €167
million ($215 million), versus a net loss of €1.3 billion ($1.8
billion) (including impairment charges) in the year-ago quarter.
Results, however, increased 318% year over year, excluding
Sales increased 5% on a comparable basis with all sectors
performing well. The only exception was the Innovation, Group &
Services sector, which registered a 13% decline in sales.
Philips is progressing well with its €800 million cost reduction
plan targeting mainly overhead and indirect costs.
Moreover, new products were launched recently, including an
innovative product for sleep apnea patients and a unique appliance
dubbed AirFryer that, aptly, fries using air.
Estimates Move Higher
Over the last 30 days, the Zacks Consensus Estimate for 2012
increased 3.6% to $1.42 as two of three estimates moved higher. The
Zacks Consensus Estimate for 2013 increased 25.8% to $1.95 as all
three estimates received a boost. The estimates represent
year-over-year growth of 54.0% for 2012 and 37.9% for 2013.
Philips is currently trading at a price-to-sales (P/S) ratio of
0.61, a discount of 58% from the peer group average of 1.45. On a
forward P/E basis, shares trade at 14.46x, compared with peer the
group average of 14.53x. The company has a ROE of 1.4% compared
with the peer group average of 15.2%.
Though the stock is yet to reach pre-recession price levels, it did
well in 2010 and plummeted again in 2011. Now, the stock is again
back on the recovery path as can be observed in the chart below.
Growth prospects appear bright with the rising Zacks Consensus
Headquartered in Amsterdam, The Netherlands, Koninklijke Philips
Electronics N.V. develops, manufactures and sells electronics goods
designed especially to cater to the various needs of its customers
in the Healthcare, Consumer Lifestyle and Lighting sectors. With
sales of approximately €22.6 billion in 2011, the company is
considered the biggest electronics manufacturer in Europe and among
the largest in the world. The company was founded in 1891 and has a
market cap of about $19.32 billion.
KONINKLIJKE PHL (PHG): Free Stock Analysis
To read this article on Zacks.com click here.