Philips soars on Q3 profit surge

Third-quarter profits surged more than 18% for Royal Philips (NYSE:PHG), sending its share price to a 19-month high as the Dutch conglomerate continues its shift toward healthcare.

Philips posted profits of €383 million ($417.3 million) on sales of €5.90 billion ($6.43 billion), for a bottom-line gain of 18.2% on sales growth of 1.1%, compared with Q3 2015.

“I am pleased with the solid 5% comparable sales growth and 8% order intake growth in our healthtech portfolio in the 3rd quarter. Overall, Philips posted 2% comparable sales growth, and the operational improvements at the personal health and diagnosis & treatment businesses, combined with continued improvements at Philips Lighting, led to the 120-basis-point increase in the adjusted EBITA margin for the Philips Group,” CEO Frans van Houten said in prepared remarks. “Our outlook for 2016 remains unchanged, as we expect further earnings improvements in the 4th quarter of the year. Going forward, we remain concerned about risk due to volatility in the markets in which we operate.

“Underlining our strategic focus on innovation, we saw healthy growth in order intake in the quarter, as well as solid sales growth and margin expansion. This was driven by recent product introductions across our healthtech portfolio and by continued synergies from the integration of Volcano in image-guided therapy. Our Accelerate! transformation program again delivered operational improvements across our businesses, while we also continue to invest significantly in quality and innovation, including in health informatics, wearable patient monitoring solutions and digital pathology,” van Houten added.

“We need to be realistic that Europe for the next several quarters will at least face a period of uncertainty, driven by both Brexit, but also by potential outcomes of European elections,” he said during a conference call with analysts, noting that Europe makes up less than 25% of total sales. “If we perform well in the United States and in China, then we can certainly weather a few fluctuations in Europe and still grow the company.”

Philips still thinks it can deal its Lumileds business after a $3.3 billion deal to offload an 80% stake in the components division to Asian buyers was blocked by U.S. regulators early this year, van Houten said, adding that there’s a “plan B” if a buyer can’t be found.

Philips shares jumped 4.6% to €27.41 apiece today in Amsterdam, their highest point since April 2015, and were trading at €27.32 each in mid-afternoon activity there, up 4.4% on the day. In New York City this morning, PHG shares were up 4.8% to $29.78 per share in pre-market trading.

($1 = €0.918182)

Material from Reuters was used in this report.

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