Company raises margins outlook on U.S. tariff refund benefit
Royal Philips shares fell as much as 11% in early European trading Tuesday, erasing the stock’s year-to-date gains, after the Dutch medical-technology company reported a 1% decline in second-quarter order intake on a comparable basis. The company attributed the dip to delays in some large North America contracts shifting to the third quarter.
The order intake decline moves the metric back into negative territory after six consecutive quarters of growth, analysts at Jefferies wrote in a note to clients. The trend could limit sales growth for the company’s diagnosis-and-treatment and connected-care divisions, Jefferies said.
Philips reported second-quarter sales of 4.36 billion euros ($4.96 billion), up 4% from a year earlier on a comparable basis. Adjusted earnings before interest, taxes and amortization rose to 717 million euros from 540 million euros, with the adjusted Ebita margin increasing to 16.4% from 12.4%.
The company reaffirmed its full-year guidance for comparable sales growth of 3% to 4.5% but said its third-quarter result is likely to come in at the lower end of that range. Philips said it expects its adjusted Ebita margin in the third quarter to be lower than a year earlier.
Philips raised its full-year adjusted Ebita margin outlook by one percentage point, to between 13.5% and 14%, reflecting U.S. tariff-refund benefits. The revised guidance means Philips will need margins to improve in the fourth quarter to reach its full-year target, analysts at Jefferies said, adding that the combination of weak order trends and tougher year-earlier comparisons in the second half makes the guidance “far from safe.”