Koninklijke Philips N.V. PHG reported second-quarter 2024 earnings of €0.48 per share, witnessing a significant rise from the year-ago quarter’s reported figure of €0.07 per share.
The company’s sales decreased 0.2% on a year-over-year basis to €4.46 billion.
Comparable sales (including adjustments for consolidation charges & currency effects) grew 1.5% year over year. The growth was attributed to strength across all segments.
Comparable sales in the Diagnosis & Treatment segment witnessed mid-single-digit growth, whereas the Connected Care and Personal Health businesses recorded low-single-digit growth.
Further, Philips’ comparable order intake increased 9% year over year in the reported quarter, primarily due to strong demand in China.
Sales improved 3% on a comparable basis in growth geographies. Sales in mature geographies were up 1% 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
Segmental Update
Diagnosis & Treatment revenues rose 2.8% from the year-ago quarter to €2.17 billion. Comparable sales jumped 4.2% year over year, driven by double-digit growth in Precision Diagnosis and Image-Guided Therapy.
Connected Care revenues increased 0.4% year over year to €1.33 billion. Comparable sales grew 2%, driven by strong growth in Enterprise Informatics.
Personal Health revenues fell 0.2% year over year to €834 million. Comparable sales rose 2.2% year over year, owing to strength in Growth geographies.
Other segment sales amounted to €121 million, down 36.6% on a year-over-year basis.
Operating Details
Gross margin expanded 70 basis points (bps) on a year-over-year basis to 44.6% in the reported quarter.
General & administrative expenses, as a percentage of sales, were 3.5%, which remained flat on a year-over-year basis. Moreover, selling expenses expanded 40 bps to 25.3%. Research & development expenses dipped 100 bps to 9.5%.
Restructuring, acquisition-related and other items amounted to a net gain of €381 million compared with a loss of €161 million a year ago.
Operating model productivity, procurement and other productivity programs delivered savings of €57 million, €71 million and €67 million, respectively. This resulted in total savings of €195 million.
Phillips’ adjusted EBITA — the company’s preferred measure of operational performance — rose 9.3% year over year to €495 million. EBITA margin expanded 100 bps on a year-over-year basis to 11.1% in the reported quarter.
Diagnosis & Treatment’s adjusted EBITA margin expanded 160 bps on a year-over-year basis to 12.2%, primarily driven by improved sales, pricing and productivity measures.
Connected Care’s adjusted EBITA margin was 8.8% in the reported quarter, which expanded 130 bps on a year-over-year basis.
Personal Health’s adjusted EBITA margin expanded 350 bps on a year-over-year basis to 16.9%.
Balance Sheet
As of Jun 30, 2024, Philips’ cash and cash equivalents were €1.8 billion compared with €1.4 billion as of Mar 31, 2024. Total debt was €8.265 billion compared with €7.737 billion as of Mar 31, 2024.
Operating cash inflow was €89 million against the year-ago quarter’s operating cash flow of €135 million.
Free cash outflow was €64 million against the year-ago quarter’s free cash flow of €5 million.
2024 Guidance
Philips expects to deliver 3-5% of comparable sales growth.
Further, adjusted EBITA margin is expected in the band of 11-11.5%.
Philips expects free cash flow to be between €900 million and €1.1 billion.
Zacks Rank & Stocks to Consider
Currently, Philips carries a Zacks Rank #4 (Sell).
Some better-ranked stocks in the broader medical market sector are Amedisys AMED, Abbott Laboratories ABT, and Akero Therapeutics AKRO, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Amedisys shares have gained 11.2% in the year-to-date period. AMED’s long-term earnings growth rate is currently projected at 9.45%.
Abbott Laboratories shares have gained 14.6% in the year-to-date period. ABT’s long-term earnings growth rate is currently projected at 8.62%.
Akero Therapeutics shares have gained 39% in the year-to-date period. The long-term earnings growth rate for AKRO is currently projected at 8.63%.
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