This European-based global company makes high tech health-care equipment as well as consumer items like electric shavers and coffee makers. Recent quarterly earnings are up 16.7%.
The company aims to significantly cut costs with a restructuring plan that includes closing its U.K. manufacturing plant. This should further spur profits.
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PHILIPS ELECTRONICS N.V. ADRs (New York symbol PHG; www.philips.com) makes health-care products, including X-ray scanners and ultrasound systems, along with consumer goods such as electric shavers and coffee makers.
The company recently acquired EPD Solutions, a maker of cardiac imaging systems used to treat patients with heart rhythm disorders. It paid 250 million euros and will have to pay as much as 210 million euros more (1 euro = $1.49 Canadian). The exact amount depends on how well the business performs.
If you exclude the contribution of new businesses and operations that the company has sold, its comparable sales in the quarter ended September 30, 2018, rose 4.3%, to 4.31 billion euros from 4.15 billion euros a year earlier.
Sales of Diagnostic & Treatment equipment (42% of total sales) rose 6.3%, while sales of Personal Health products (40%) gained 3.9%. However, sales of Connected Care (patient monitoring) fell 1.7%.
Earnings in the quarter rose 16.7%, to 307 million euros, or 0.32 per ADR from 263 million euros, or 0.28.
The stock trades at 26.9 times the $1.30 per ADR that Philips will probably earn in 2018. That seems high, but the company’s current restructuring plan should cut 400 million euros from its annual costs. The $0.94 dividend yields 2.7%.
The company plans to close its sole plant in the U.K. in 2020. The facility makes baby-feeding bottles. Philips will shift that production to plants in Holland and Asia.
The U.K. closure is part of a plan to shrink the company’s worldwide manufacturing operations to 30 plants from 50. The move will also limit Philips’ exposure to trade disputes in the wake of the U.K.’s decision to leave the European Union.
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