PHILIPS ELECTRONICS N.V. ADRs $31 (New York symbol PHG; Conservative Growth Portfolio, Manufacturing & Industry sector; ADRs outstanding: 914.6 million; Market cap: $28.4 billion; Price-to-sales ratio: 0.9; Dividend yield: 3.0%; TSINetwork Rating: Average; www.philips.com) gets about 50% of its revenue by making health care products, such as Xray and magnetic resonance imaging (MRI) scanners. It also makes lighting (30% of revenue) and consumer electronics, such as appliances and electric razors (20%).
The company recently agreed to sell its video and audio products business to Japan’s Funai Electronics for 150 million euros (1 euro = $1.32 Canadian). As part of the deal, it will receive royalties on sales of Philipsbranded products for at least the next five years.
Philips also continues to make progress with a major restructuring plan, which includes making its plants more efficient and cutting 4% of its workforce. Moreover, Philips is expanding sales in emerging markets like Turkey, Russia and China.
This plan is starting to pay off. In 2012, Philips earned 262 million euros, or 0.25 euros per ADR (each ADR represents one Philips common share). That’s a big improvement over 2011, when it lost 776 million euros, or 1.36 euros per ADR.
Revenue rose 9.8%, to 24.8 billion euros from 22.6 billion euros. If you exclude contributions from acquisitions and the impact of foreign exchange rates, revenue would have risen 4%.
Thanks to the restructuring, the company’s gross profit margin (gross profits, excluding unusual items, divided by revenue) rose to 9.5% in 2012 from 8.1% in 2011. Savings from the restructuring plan should increase Philips’s gross profit margin to between 10% and 12% in 2013.
These savings should push up the company’s 2013 earnings to $1.96 a share. The stock trades at 15.8 times that estimate. The $0.94 dividend yields 3.0%.
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