Phillips Downgraded to Strong Sell - Analyst Blog

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Zacks Investment Research downgraded Koninklijke Philips N.V ( PHG ) to a Zacks Rank #5 (Strong Sell) on Jul 16.

Why the Downgrade?

Philips has been witnessing downward estimate revisions. After soft first-quarter 2014 results, the company has been looking for ways to turn around. The company recently announced management restructuring of its healthcare division. Along with the announcement, Philips had also revealed that its Healthcare division's CEO - Deborah DiSanzo will be stepping down from the role citing disappointing financial performance of the healthcare business.

Deborah DiSanzo had stated that after the weakness in the first quarter, the healthcare EBITA (Earnings before Interest, Tax and Amortization) is likely to be below expectations in the second quarter as well. However, she mentioned that third quarter onwards, an upturn is expected with the resumption of activity at the Cleveland facility. Philips had made a voluntary suspension at its Cleveland healthcare production facility in the first quarter, which had proved to be a drag on the company's financials.

In the last quarter, the company's earnings also came in below expectations owing to adverse currency effects, uncertain economic conditions in key regions like China and Russia. The company's adjusted EBITA declined to 7.3% of sales from 8.0% in the prior-year quarter.

All these triggered a downtrend in the Zacks Consensus Estimate. The downward estimate revision in the last 7 days led to a 1.7% decline in the Zacks Consensus Estimate for 2014 to $1.69 per share, whereas for 2015, the Zacks Consensus Estimate declined 0.5% to $2.06 per share. The Zacks Consensus Estimate for 2014 has declined about 19.5% over the last 60 days and 22.8% over the last 30 days. For 2015, the Zacks Consensus Estimate declined 17.2% and 20.8% over 60 and 90 days respectively.

Other Stocks to Consider

Other better-ranked stocks that look promising at the moment include Enersys Inc. ( ENS ), Franklin Electric Co., Inc. ( FELE ) and Emerson Electric Co. ( EMR ). WhileEnersys sports a Zacks Rank #1 (Strong Buy), both Franklin Electric and Emerson Electric carry a Zacks Rank #2 (Buy).

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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.

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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