PHG Stock Down 4%, Philips Raises 2021 Outlook after Increase in Q1 Sales amid Coronavirus Pandemic

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by Ibukun Ogundare · 3 min read
PHG Stock Down 4%, Philips Raises 2021 Outlook after Increase in Q1 Sales amid Coronavirus Pandemic
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With the spike in Q1 sales, Philips now expects “low-to-mid-single-digit comparable sales growth.”

Health technology company Koninklijke Philips NV (NYSE: PHG) has raised its 2021 outlook as the company recorded an increase in first quarter (Q1) sales. Philip revealed a surge in its quarterly profit due to the growing demand for hospital equipment and personal health appliances amid the coronavirus pandemic.

Philips 2021 Outlook

Philips lifted its outlook for 2021 while announcing growth in its core earnings. In a press release published on the 26th of April, Philips noted that its core earnings climbed 74% in Q1. The company said the company’s earnings was EUR 362 million ($438 million), above analysts’ prediction.

Additionally, Philips reported an increased adjusted EBITA of EUR 326 million or 9.5% of sales. In the press release, the company compared the adjusted EBITA to EUR 208 or 5.6% of sales in the same period last year.

Also, free cash flow for Q1 was EUR 169 million. In 2020 Q1, Philips saw an outflow of EUR 15 million.

Philips CEO Frans Van Houten noted that Philips’ in its sales growth and profitability in always business segments. He added:

“Despite the ongoing impact of COVID-19, our performance gained momentum with a strong 9% comparable sales growth profitability improvement in the first quarter with all business segments and markets contributing.”

With the spike in Q1 sales, Philips now expects “low-to-mid-single-digit comparable sales growth.” The new expectation is an upgrade to the Philips 2021 outlook.

Philips to Sell Domestic Appliances Business

While reporting the Q1 earnings, Van Houten noted that the company had completed its agreement to sell the Domestic Appliance business, concluding its major divestments. The company initially announced the signed agreement on the 25th of March, 2021. At the time, the agreement was not completed, and Philips was still consolidating the business under International Financial Reporting Standards (IFRS) till the completion of the sale. The CEO expressed satisfaction with its partnership with Hillhouse Capital, the new owner of the business.

Furthermore, Van Houten revealed that Phillips had completed the acquisition of BioTelemetry and Capsule Technologies. According to him, the acquisition will fuel Philips’ transformation into a solutions company. The CEO added that it would also strengthen the company’s position to provide solutions to health-related problems.

“Looking ahead, while we continue to see uncertainty related to the impact of COVID-19 across the world, we see increased demand in the Diagnosis & Treatment and Person Health businesses. We now plan to deliver low-to-mid single growth for the Group in 2021 (compared to the earlier projection of low-single-digit growth), with an Adjusted EBITA margin improvement of 60-80 basis points.”

Philips stock is currently trading at $58.71, a 3.93% loss over its previous close of $61.10. The company has been surging over the last 12 months. The company jumped 42.78% over the past year and added nearly 13% since 2021 began. In addition, the health technology company has grown 7.17% in the last three months. Also, PHG upped more than 7% over the past month. In the last five days, Philips is up nearly 1%.

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