Philips Stock (PHG): Why The Price Fell Today

By Amit Chowdhry ● Jan 12, 2022
  • The stock price of Koninklijke Philips NV (NYSE: PHG) fell by over 16% pre-market today. This is why it happened.

The stock price of Koninklijke Philips NV (NYSE: PHG) fell by over 16% pre-market today. Investors are responding negatively to Royal Philips providing an update on the fourth-quarter 2021 and full-year 2021 financial results.

The group sales for the quarter are expected to be approximately EUR 4.9 billion, which is around EUR 350 million lower than Philips’ earlier expectations. This is mainly due to intensified global supply chain shortages (primarily related to electronic components and freight capacity), as well as the postponement of customer equipment installations. 

The comparable sales decline was approximately 10%, mainly due to these effects and the impact of the earlier announced Philips Respironics recall.* The Group Adjusted EBITA for the quarter is expected to be approximately EUR 650 million, which is approximately 13% of sales, impacted by the decline in sales and higher supply costs.

Group sales for the full year 2021 are now expected to be approximately EUR 17.2 billion, resulting in an expected Group comparable sales decline of approximately 1% for the year. The company said supply chain headwinds combined with the impact related to the Philips Respironics recall amounted to an impact of approximately 5 percentage points on the Group’s full-year comparable sales. And Group Adjusted EBITA for the full year is expected to be around EUR 2.1 billion, or approximately 12% of sales.

The Group comparable order intake growth in the fourth quarter has remained robust with 4% growth driven by double-digit growth in the Diagnosis & Treatment businesses, resulting in 4% growth for the full year 2021. And this further builds on the high-single-digit comparable order intake growth in Q4 2020 and full-year 2020.

The Group restructuring, acquisition-related and other charges in the fourth quarter are expected to amount to EUR 420 million, which is EUR 315 million above the previously guided charges due to a further increase of the field action provision related to the voluntary Philips Respironics recall notification and a provision for quality actions and other matters in the Connected Care businesses.

Update on voluntary Philips Respironics recall notification

Philips Respironics is increasing the field action provision by around EUR 225 million — which is mainly due to the higher volume of devices now requiring remediation and increased supply costs. And Philips Respironics expanded the scope to certain older devices in the interest of patients and in alignment with the relevant competent authorities and now expects to remediate a total of about 5.2 million registered devices globally.

KEY QUOTES:

“We continue to see good demand for our innovative products and solutions, resulting in an all-time high order book. However, we faced significantly intensified global supply chain issues across our businesses, in addition to customer postponement of equipment installations in hospitals. We are closely working with suppliers and governments to address the shortages in the healthcare supply chain and ensure they recognize the importance of prioritizing life-saving medical equipment.”

“Patient well-being is at the heart of everything we do at Philips, and we aim to get a solution to patients as fast as possible. To date, Philips Respironics has produced a total of approximately 1.5 million repair kits and replacement devices, of which approximately 700,000 have reached customers. I am also encouraged by the positive VOC test results to date for the first-generation DreamStation devices, which we published in December 2021.”

— Frans van Houten, CEO of Royal Philips

Disclaimer: This content is intended for informational purposes. Before making any investment, you should do your own analysis.