Philips Lifts 2021 Forecast as Q1 Sales Soar amid Pandemic

By Bart H. Meijer

The Dutch health technology company said core earnings surged 74% in the first quarter to 362 million euros ($438 million) compared with the year earlier period, on a 9% rise in comparable sales, easily beating analysts’ expectations.

“Revenue growth was a bit stronger than we originally expected”, Chief Executive Frans van Houten told reporters.

“On that basis and expecting a strong second quarter, we are raising our guidance.”

Philips, which sells products ranging from electrical toothbrushes to medical imaging systems, said it now expects “low-to-mid-single-digit comparable sales growth” for 2021, up from earlier guidance for low growth.

All business segments and markets contributed to the strong growth in the first months of 2021, Van Houten said, as hospitals resumed elective procedures and investments which were put on hold during the first wave of the pandemic last year.

Demand also remained strong at the Connected Care division, which supplies equipment needed to treat COVID-19 patients such as respiratory machines and monitoring and software platforms that allow remote care.

Philips still expects the growth of this division to slow over the course of this year, following a surge in demand in the second half of 2020.

The company’s shares openend roughly flat on Monday, having risen around 15% since the start of the year.

PROVISION DAMPENS NET PROFIT

However, Philips also said it had made a 250 million euro provision to deal with risks it detected in some of its respiratory care devices.

It said sound abatement foam used in some of its sleep and respiratory care devices could degrade when cleaned incorrectly or when used in hot and humid conditions.

“We have seen a very low incident rate”, Van Houten said. “But out of precaution we feel we need to take action and repair affected machines and change this component.”

The provision meant net profit was stable at 40 million euros in the first quarter from the year earlier period.

Analysts had expected 326 million euros in adjusted earnings before interest, taxes and amortisation (EBITA) and a 6% rise in comparable sales.

Last year’s results were restated to reflect the 3.7 billion euro sale of the household appliances business to Hillhouse Capital announced last month.

(Reporting by Bart Meijer; Editing by Edwina Gibbs, Kirsten Donovan)

Philips Core Earnings Surge 7% in Q4, Shares Gain

Dutch multinational conglomerate Philips said its core earnings surged 7% in the fourth quarter and said it has planned to deliver low-single-digit comparable sales growth, driven by solid demand for diagnosis & treatment and personal health.

Philips reported EBITA of 1.14 billion euros in the last quarter of 2020, with comparable sales growing 7% at 6 billion euros. The health technology company reported EPS from continuing operations (diluted) amounted of EUR 0.66; Adjusted EPS increased to EUR 0.94, compared to EUR 0.83 in Q4 2019.

As a result of our stronger performance in the second half of the year, following a challenging first half due to the impact of COVID-19, the performance was resilient, the company said in the statement. For the full-year 2020, the company delivered 3% comparable sales growth, an Adjusted EBITA margin of 13.2% and a strong free cash flow of EUR 1.9 billion.

Philips closed 2.31% higher at €46.69 in Amsterdam on Monday; the stock rose nearly 3% in 2020.

Analyst Comments

“We expect Philips’s shares to show relative outperformance to the EU MedTech sector today. Philips reported its Q4 FY20 result this morning, which represented a slight beat to consensus. Despite our concerns that Philips could make some cautionary statements regarding its previously announced FY21 guidance, due to a resurgence of COVID-19, the company appears to remain confident in its previously set objectives,” said Michael Jungling, equity analyst at Morgan Stanley.

“Improving growth profile: New FY21-25 targets of +5-6% comparable sales growth imply an acceleration from the historical CAGR of +4%. Margin Recovery: Improvement in mix across the business drives higher operational leverage, while cost management initiatives in Personal Health and Diagnosis & Treatment helps limit pressures on EBITA margin. Valuation: we believe a durable growth recovery in the capital equipment market and consumer demand for Personal Health, puts the company in an attractive risk-reward positioning relative to other companies in our sector over the next 12 months.”

Philips Stock Price Forecast

Nine analysts who offered stock ratings for Philips in the last three months forecast the average price in 12 months at €50.22 with a high forecast of €52.00 and a low forecast of €44.00. The average price target represents a 10.56% increase from the last price of €45.43. From those nine analysts, eight rated “Buy”, one rated “Hold” and none rated “Sell”, according to Tipranks.

Morgan Stanley gave a base target price of €50 with a high of €67 under a bull scenario and €34 under the worst-case scenario. The firm currently has an “Overweight” rating on the health technology company’s stock.

Several other analysts have also recently commented on the stock. Philips has been assigned a €44.00 target price by equities researchers at JP Morgan. The firm presently has a “neutral” rating on the stock. Sanford C. Bernstein set a €52 target price and gave the stock a “buy” rating. Berenberg Bank set a €49 price target and gave the stock a “buy” rating.

In addition, Deutsche Bank set a €52 price target and gave the stock a “buy” rating. Kepler Capital Markets set a €44 target price and gave the company a “neutral” rating. At last, Barclays set a €51 price objective and gave the stock a “buy” rating.

Upside and Downside Risks

Risks to Upside: 1) Product Launch Momentum: Momentum from on-going product launches and COVID-19 focused products drive top-line growth and market share gains. 2) Online retail strategy: Growth in online consumer retail could accelerate organic growth – highlighted by Morgan Stanley.

Risks to Downside: 1) FX: EM currency volatility could be a source of headwinds on margins. 2) COVID-19: pressure on consumer and hospital budgets following a potential COVID-19 driven recession.

Check out FX Empire’s earnings calendar

Stock Pick Update: Dec. 23 – Dec. 29, 2020

In the last five trading days (December 16 – December 22) the broad stock market has extended its short-term consolidation following record-breaking run-up. The S&P 500 index reached new record high of 3,726.70 on Friday, before retracing most of last week’s advances.

The S&P 500 has lost 0.24% between December 16 open and December 22 close. In the same period of time our five long and five short stock picks have lost 0.04%. Stock picks were relatively slightly stronger than the broad stock market last week. Our long stock picks have lost 3.94%, however short stock picks have resulted in a gain of 3.86%. Short stock picks’ performance outpaced the benchmark return on the downside, but the whole portfolio followed broad stock market very closely.

There are risks that couldn’t be avoided in trading. Hence the need for proper money management and a relatively diversified stock portfolio. This is especially important if trading on a time basis – without using stop-loss/ profit target levels. We are just buying or selling stocks at open on Wednesday and selling or buying them back at close on the next Tuesday.

If stocks were in a prolonged downtrend, being able to profit anyway, would be extremely valuable. Of course, it’s not the point of our Stock Pick Updates to forecast where the general stock market is likely to move, but rather to provide you with stocks that are likely to generate profits regardless of what the S&P does.

Our last week’s portfolio result:

Long Picks (December 16 open – December 22 close % change): XOM (-5.74%), COP (-8.91%), WFC (-2.29%), BK (+0.02%), FB (-2.79%)
Short Picks (December 16 open – December 22 close % change): DUK (-3.10%), EVRG (-4.03%), SPG (-5.23%), CBRE (-5.37%), KO (-1.57%)

Average long result: -3.94%, average short result: +3.86%
Total profit (average): -0.24%

Stock Pick Update performance chart since Nov 18, 2020:

Let’s check which stocks could magnify S&P’s gains in case it rallies, and which stocks would be likely to decline the most if S&P plunges. Here are our stock picks for the Wednesday, December 23 – Tuesday, December 29 period.

We will assume the following: the stocks will be bought or sold short on the opening of today’s trading session (December 23) and sold or bought back on the closing of the next Tuesday’s trading session (December 29).

We will provide stock trading ideas based on our in-depth technical and fundamental analysis, but since the main point of this publication is to provide the top 5 long and top 5 short candidates (our opinion, not an investment advice) for this week, we will focus solely on the technicals. The latter are simply more useful in case of short-term trades.

First, we will take a look at the recent performance by sector. It may show us which sector is likely to perform best in the near future and which sector is likely to lag. Then, we will select our buy and sell stock picks.

There are eleven stock market sectors: Energy, Materials, Industrials, Consumer Discretionary, Consumer Staples, Health Care, Financials, Technology, Communications Services, Utilities and Real Estate. They are further divided into industries, but we will just stick with these main sectors of the stock market.

We will analyze them and their relative performance by looking at the Select Sector SPDR ETF’s .

Based on the above, we decided to choose our stock picks for the next week. We will choose our 5 long and 5 short candidates using trend-following approach:

  • buys: 2 x Technology, 2 x Energy, 1 x Financials
  • sells: 2 x Utilities, 2 x Real Estate, 1 x Consumer Staples

Buy Candidates

CRM Salesforce.com, Inc. – Technology

  • Stock remains above its short-term upward trend line
  • Uptrend continuation play
  • The support level is at $220 and resistance level is at $240-250 (short-term target profit level)

NVDA NVIDIA Corp. – Technology

  • Stock trades above medium-term upward trend line
  • Possible breakout above short-term consolidation
  • The support level is at $490-500 and resistance level is at $550

PSX Phillips 66 – Energy

  • Possible short-term bull flag pattern – uptrend continuation play
  • The support level is at $60 and resistance level is at $70

Summing up , the above trend-following long stock picks are just a part of our whole Stock Pick Update . The Technology and Energy sectors were relatively the strongest in the last 30 days. So that part of our ten long and short stock picks is meant to outperform in the coming days if the broad stock market acts similarly as it did before.

We hope you enjoyed reading the above free analysis, and we encourage you to read today’s Stock Pick Update – this analysis’ full version. There, we include the stock market sector analysis for the past month and remaining long and short stock picks for the next week. There’s no risk in subscribing right away, because there’s a 30-day money back guarantee for all our products, so we encourage you to subscribe today .

For a look at all of today’s economic events, check out our economic calendar.

Thank you.

Paul Rejczak
Stock Trading Strategist
Sunshine Profits – Effective Investments through Diligence and Care

 

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Disclaimer

All essays, research and information found above represent analyses and opinions of Paul Rejczak and Sunshine Profits’ associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Paul Rejczak and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Rejczak is not a Registered Securities Advisor. By reading Paul Rejczak’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Paul Rejczak, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

Philips to Acquire US-Based Cardiac Care BioTelemetry for $2.8 Billion; Target Price €52 in Best Case

Dutch multinational conglomerate Philips announced to acquire a U.S.-based remote cardiac monitoring and diagnostic company BioTelemetry in a deal worth $2.8 billion in an attempt to scale up its remote care products business.

This deal is a strong fit with Philips’ strategy to transform the delivery of healthcare: combination of Philips’ leading patient monitoring position in the hospital with BioTelemetry’s leading cardiac diagnostics and monitoring position outside the hospital, the company said in the statement.

“We have always been very optimistic about connected care. With COVID-19 we have seen an acceleration of the demand and we think this acquisition fits perfectly in this era where remote patient monitoring will become ever more important,” Chief Executive Frans van Houten said.

BioTelemetry business is expected to deliver double-digit growth and improve its Adjusted EBITA margin to over 20% by 2025; acquisition will be sales growth and adjusted EBITA margin accretive for Philips in 2021, Philips added.

At the time of writing, Philips’ shares traded 2.07% higher at $44.94 on Friday; the stock is up over 5% so far this year.

Philips Stock Price Forecast

Ten equity analysts forecast the average price in 12 months at €48.84 with a high forecast of €52.00 and a low forecast of €39.40. The average price target represents a 10.98% increase from the last price of €44.01. All those ten analysts, eight rated “Buy”, two rated “Hold” and none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of €50 with a high of €67 under a bull-case scenario and €34 under the worst-case scenario. The firm currently has an “Overweight” rating on the health technology company’s stock.

Several other analysts have also upgraded their stock outlook. Philips has been given a €51 price objective by investment analysts at Barclays. The brokerage presently has a “buy” rating on the stock. Kepler Capital Markets set a €44 price objective and gave the stock a “neutral” rating. Berenberg Bank set a €49.00 target price and gave the stock a “buy” rating. At last, UBS Group set a €50 target price and gave the stock a “buy” rating.

Analyst Comments

“Improving growth profile: New FY21-25 targets of +5-6% comparable sales growth imply an acceleration from the historical CAGR of +4%. Margin Recovery: Improvement in mix across the business drives higher operational leverage, while cost management initiatives in Personal Health and Diagnosis & Treatment helps limit pressures on EBITA margin,” said Michael Jungling, equity analyst at Morgan Stanley.

“Valuation: we believe a durable growth recovery in the capital equipment market and consumer demand for Personal Health, puts the company in an attractive risk-reward positioning relative to other companies in our sector over the next 12 months,” Jungling added.

Upside and Downside Risks

Risks to Upside: Product Launch Momentum: Momentum from on-going product launches and COVID-19 focused products drives topline growth and market share gains. Online retail strategy: Growth in online consumer retail could accelerate organic growth– highlighted by Morgan Stanley.

Risks to Downside: FX: EM currency volatility could be a source of headwinds on margins. COVID-19: pressure on consumer and hospital budgets following a potential COVID-19 driven recession.

Philips Posts Better-Than-Expected Third-Quarter Profit; Target Price EUR 56 in Best Case

Philips, a leading European electrical engineering group, reported better-than-anticipated core earnings in the third quarter of this year as the COVID-19 pandemic boosted demand for hospital equipment with comparable sales rising 10% to 4.98 billion euros in the quarter.

Dutch health technology company said its income from continuing operations increased to EUR 341 million, compared to EUR 211 million in Q3 2019. Adjusted EBITA margin increased to 15.4% of sales, compared to 12.4% of sales in Q3 2019.

Philips said its third-quarter income from operations improved to EUR 476 million, compared to EUR 320 million in Q3 2019. EPS from continuing operations (diluted) amounted to EUR 0.37; Adjusted EPS increased to EUR 0.60, compared to EUR 0.46 in Q3 2019. Operating cash flow improved to EUR 770 million, compared to EUR 356 million in Q3 2019. The market consensus for core earnings was 630 million euros, on 4.82 billion euros of sales.

Philips forecasts average annual comparable sales growth of 5-6% and said next year its comparable sales will deliver low-single-digit growth, driven by solid growth in Diagnosis & Treatment and Personal Health. The company expects an Adjusted EBITA margin improvement of 60-80 basis points on average annually from 2021, reaching the high teens for the Group by 2025.

Philips shares traded closed 3.62% higher at EUR41.5 on Friday; the stock is down about 3% so far this year. At the time of writing, it was trading 1.3% higher at EUR 42.84.

Executive comments

“We are excited to continue our journey to create further value by improving growth and profitability, while recognizing that we are in very uncertain times, and with the assumption that the world economy will return to growth next year,” said CEO Frans van Houten.

“The new targets are underpinned by our strategic imperatives to further improve customer and operational excellence, boost growth in our core businesses through geographical expansion and more customer partnerships and win with innovative solutions along the health continuum. Our strategy to transform care along the health continuum – from healthy living and prevention to diagnosis and treatment, telehealth and home care – strongly resonates with customers and has been further validated during the COVID-19 pandemic.”

Philips stock forecast

Eleven analysts forecast the average price in 12 months at EUR 47.74 with a high forecast of EUR 56.00 and a low forecast of EUR 38.60. The average price target represents a 14.61% increase from the last price of EUR 41.65. From those 11 equity analysts, eight rated “Buy”, three rated “Hold” and none rated “Sell”, according to Tipranks.

Morgan Stanley gave a base target price of EUR 48 with a high of EUR 64 under a bull scenario and EUR 33 under the worst-case scenario. Koninklijke Philips has been given a EUR 47.50 price target by research analysts at Goldman Sachs Group. The brokerage presently has a “buy” rating on the stock.

Several other analysts have also recently commented on the stock. Barclays set a EUR 51 target price on shares of Koninklijke Philips and gave the company a “buy” rating. Sanford C. Bernstein set a EUR 52 price objective and gave the stock a “buy” rating. JPMorgan Chase & Co. set a EUR 38.60 price objective and gave the stock a “neutral” rating. Deutsche Bank set a EUR 54 price objective and gave the stock a “buy” rating.

Analyst Comments

“Order Book Momentum: acceleration in order book growth for the Connected Care business (Ventilators, Patient Monitoring) should offset COVID-19 related pressures in Personal Health; stabilising sales developments over the near term. Margin Recovery: Outsized orders in Connected Care should drive operational leverage, while cost management initiatives in Personal Health and Diagnosis & Treatment helps limit pressures on EBITA margin,” said Michael Jungling, equity analyst at Morgan Stanley.

“Valuation: we believe the company’s exposure to areas in high demand (i.e. Ventilators, Patient Monitoring, CT and X-Ray) puts the company in an attractive risk-reward positioning relative to other companies in our sector over the next 12 months.”

Upside and Downside Risks

Upside: 1) Product Launch Momentum: Momentum from on-going product launches and COVID-19 focused products drive topline growth and market share gains. 2) Online retail strategy: Growth in online consumer retail could accelerate organic growth, highlighted by Morgan Stanley.

Downside: 1) FX: EM currency volatility could be a source of headwinds on margins. 2) COVID-19: pressure on consumer and hospital budgets following a potential COVID-19 driven recession.

Check out FX Empire’s earnings calendar