Philips (AS:PHG) Q3 Results

Philips reported third-quarter results that missed revenue targets and revised its outlook due to weaker demand in China.

Financial Highlights

• Revenues missed consensus by 3%.
• Order intake fell 2% after a strong prior quarter.
• Adjusted EBITA met expectations, but analysts at UBS noted it was inflated by high royalty income. Excluding this, adjusted EBITA would have missed by 8%.

Revised Outlook

The overall revenue shortfall raised concerns about Philips' growth, leading management to revise its full-year revenue growth forecast from 3%-5% down to 0.5%-1.5%. This reflects increased uncertainties in China where demand challenges have intensified.

Segment Performance

Analyzing various segments:
– Diagnosis & Treatment sales fell 3%, showing only a 1% organic decline, below the expected 2% growth.
– Connected Care sales missed forecasts by 3%, and Personal Health sales lagged by 7%, with no organic growth.

Despite a favorable boost in income from royalties, underlying profitability is under pressure. Management's guidance cut and broader revenue miss have impacted investor sentiment significantly. UBS analysts flagged this could lead to more scrutiny, particularly given disappointing order intake amid a soft comparison period last year.

J.P. Morgan analysts noted: "We believe margin guidance will be lowered, projecting cuts of 2-3% for sales and adjusted EBITA. We expect shares to drop mid-single digits, potentially more."