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Koninklijke Philips NV ADR PHG

Morningstar Rating
$20.34 +0.01 (0.05%)
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Company Report

Philips Earnings: New Restrictions Weigh on Sleep and Respiratory Business; Fair Value Down 16%

Narrow-moat Philips' shares were down 6% at the time of the writing as the firm has provided new details on the consent decree it agreed on with the U.S. Food and Drug Administration. The consent decree will prevent Philips from selling new respiratory devices in the United States for several years, although the exact timing is still uncertain. The firm can still sell consumables and replacement parts, and outside the U.S. it can still sell new devices if certain conditions are met. However, this is a big blow for Philips, given that the U.S. accounts for more than 50% of its sleep business under normal conditions. The firm has recorded an additional EUR 363 million provision from remediation activities and still faces uncertainty from litigation brought by patients. Although Philips' reputation in sleep and respiratory devices had already been severely hurt, we now believe it will be very difficult for the firm to ever recover its competitive position in this market. The new restrictions will curtail the growth profile of this business for several years. Sleep and respiratory revenue has declined from a record EUR 2.7 billion in 2020 to around EUR 1 billion today. We are lowering our sales and EBIT margin forecasts and reducing our fair value estimate to EUR 21 per share from EUR 25. Our Morningstar Uncertainty Rating is High.

Price vs Fair Value

PHG is trading at a 12% discount.
Price
$20.34
Fair Value
$53.00
Uncertainty
High
1-Star Price
$97.62
5-Star Price
$18.30
Economic Moat
Hvrdfx
Capital Allocation
Tlhwvmjs

Bulls Say, Bears Say

Bulls

Philips' large installed base in imaging devices and existing footprint in many hospitals is an advantage that allows it to cross-sell and introduce new products with less effort than other smaller players.

Bears

The continued transition to value-based care in many parts of the world will result in structural price declines for Philips' imaging business.

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News

Trading Information

Previous Close Price
$20.33
Day Range
$20.1920.35
52-Week Range
$14.9624.27
Bid/Ask
$19.61 / $21.86
Market Cap
$18.44 Bil
Volume/Avg
810,984 / 1.0 Mil

Key Statistics

Price/Earnings (Normalized)
15.16
Price/Sales
0.99
Dividend Yield (Trailing)
Dividend Yield (Forward)
Total Yield
3.90%

Company Profile

Philips is a diversified global healthcare company operating in three segments: diagnosis and treatment, connected care, and personal health. Around 50% of the company's revenue comes from the diagnosis and treatment segment, which features imaging systems, ultrasound equipment, image-guided therapy solutions and healthcare informatics. The connected care segment (around 30% of revenue) encompasses monitoring and analytics systems for hospitals and sleep and respiratory care devices, whereas the personal health business (remainder of revenue) includes electric toothbrushes and men's grooming and personal-care products.
Sector
Healthcare
Industry
Medical Devices
Stock Style Box
Large Core
Total Number of Employees
69,656

Competitors

Valuation

Metric
PHG
GE
SIE
Price/Earnings (Normalized)
15.1657.5016.43
Price/Book Value
1.396.403.00
Price/Sales
0.992.601.87
Price/Cash Flow
20.6845.0013.84
Price/Earnings
PHG
GE
SIE

Financial Strength

Metric
PHG
GE
SIE
Quick Ratio
0.740.791.06
Current Ratio
1.201.181.35
Interest Coverage
−0.879.457.41
Quick Ratio
PHG
GE
SIE

Profitability

Metric
PHG
GE
SIE
Return on Assets (Normalized)
3.84%1.85%4.49%
Return on Equity (Normalized)
9.21%10.11%14.02%
Return on Invested Capital (Normalized)
6.73%6.27%5.68%
Return on Assets
PHG
GE
SIE
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