Philips' (PHG) Q4 Earnings Down Y/Y, Supply Chain Issues Ease

Koninklijke Philips N.V. PHG reported fourth-quarter 2022 adjusted earnings of €0.41 per share, down 28.1% year over year.

Sales increased 9.7% on a year-over-year basis to €5.42 billion. Comparable sales (including adjustments for consolidation charges & currency effects) increased 3% year over year, primarily due to improved component supplies.

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

Philips’ comparable order intake decreased 8% year over year in the reported quarter. Diagnosis & Treatment businesses witnessed a high-single-digit decline, while the Connected Care business witnessed a double-digit decline.

Sales decreased 4% on a comparable basis in growth geographies. Sales in mature geographies were up 6% year over year on a comparable basis.
 

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

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 6.06% following the fourth-quarter 2022 results. Markedly, Philips shares have declined 45.9% in the past year compared with the Zacks Medical sector’s decline of 12%.

Segmental Update

Diagnosis & Treatment revenues increased 12% from the year-ago quarter to €2.81 billion. Comparable sales increased 5% year over year, driven by high single-digit growth in Ultrasound and Image-Guided Therapy, due to improved component supplies. Diagnostic Imaging recorded low-single-digit growth.

Connected Care business revenues increased 14% year over year to €1.37 billion. Comparable sales increased 5%, primarily due to strong double-digit growth in Hospital Patient Monitoring.

Personal Health’s comparable sales declined 4%, with low-single-digit growth in Oral Healthcare, which was offset by a double-digit decline in Personal Care.

Other segment sales amounted to €190 million, up €4 million on a year-over-year basis.

Operating Details

Gross margin expanded 220 basis points (bps) on a year-over-year basis to 38.8% in the reported quarter.

General & administrative expenses, as a percentage of sales, increased 110 bps on a year-over-year basis to 2.5%. Moreover, selling expenses decreased 20 bps to 23.8%. Research & development expenses decreased 30 bps to 9.6%.

Restructuring, acquisition-related and other charges amounted to €60 million compared with €14 million in the year-ago quarter.

Philips’ adjusted earnings before interest, taxes and amortization (“EBITA”) — the company’s preferred measure of operational performance — increased 0.6% year over year to €651 million.

Diagnosis & Treatment’s EBITA margins contracted 160 bps on a year-over-year basis to 11.3%. Connected Care’s adjusted EBITA margins expanded 50 bps to 12.6%.

Personal Health’s adjusted EBITA margins contracted 410 bps on a year-over-year basis to 17%.

Balance Sheet

As of Dec 31, 2022, Philips’ cash and cash equivalents were €1.17 billion and total debt was €8.20 billion. This compares with cash and cash equivalents of €776 million and total debt of €8.31 billion as of Sep 30, 2022.

Operating cash outflow was €173 million against the year-ago quarter’s operating cash flow of €1.63 billion.

Guidance

Philips expects to deliver low-single-digit comparable sales growth and high-single-digit adjusted EBITA margin in 2023.

Zacks Rank and Other Stocks to Consider

Phillips currently has a Zacks Rank #2 (Buy).

Hologic HOLX, Labcorp LH and McKesson MCK are some same-ranked stocks worth considering in the same sector. All three stocks carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Both Hologic and McKesson are set to report their quarterly results on Feb 1. Labcorp is expected to report its quarterly result on Feb 16.

In the past year, shares of HOLX and MCK have gained 16.9% and 47.5%, respectively. However, shares of LH have declined 7.5% over the same time frame.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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