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Exane BNP Paribas Upgrades Koninklijke Philips to ‘Outperform’

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Price movement of Koninklijke Philips

Koninklijke Philips (PHG) has a market cap of $24.7 billion. It fell by 0.94% to close at $26.48 per share on May 11, 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were -0.38%, -4.2%, and 4.1%, respectively, as of the same day. This means that PHG is trading 3.9% below its 20-day moving average, 3.3% below its 50-day moving average, and 1.1% above its 200-day moving average.

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Related ETFs and peers

The Vanguard FTSE Europe ETF (VGK) invests 0.30% of its holdings in Philips. The ETF tracks the FTSE Developed Europe Index, a market-cap-weighted index of European securities. The YTD price movement of VGK was -1.7% as of May 11, 2016.

The Vanguard FTSE Developed Markets ETF (VEA) invests 0.18% of its holdings in Philips. VEA tracks a market-cap-weighted index of large-cap and mid-cap stocks from developed markets outside the United States, dynamically transitioning to include small caps and Canadian stocks.

The market caps of Philips’s competitors are as follows:

  • General Electric (GE) — $276.9 billion
  • Hologic (HOLX) — $9.5 billion

Exane BNP Paribas upgraded Philips

Exane BNP Paribas has upgraded Koninklijke Philips to “outperform” from “neutral.”

Performance of Koninklijke Philips in fiscal 1Q16

Koninklijke Philips reported fiscal 1Q16 sales of 5.5 billion euros, a rise of 3.3% compared to sales of 5.3 billion euros in fiscal 1Q15. Sales from its personal health, diagnosis and treatment, and connected care and health informatics segments rose 5.8%, 8.8%, and 11.0%, respectively.

Sales from the HealthTech Other and Lighting segments fell by 23.7% and 1.8%, respectively, in fiscal 1Q16 compared to fiscal 1Q15. The company’s cost of sales as a percentage of sales fell by 1.7%, and its operating income rose by 43.2% in fiscal 1Q16 compared to fiscal 1Q15.

Its net income and EPS (earnings per share) fell to 37.0 million euros and 0.03 euros, respectively, in fiscal 1Q16. That compares to 100.0 million euros and 0.11 euros, respectively, in fiscal 1Q15.

Koninklijke Philips’s cash and cash equivalents fell by 21.6%, and its inventories rose by 4.0% in fiscal 1Q16 compared to fiscal 4Q15. Its current ratio and long-term debt-to-equity ratio fell to ~1.2x and 0.75x, respectively, compared to ~1.3x and 0.77x, respectively, in fiscal 4Q15.

As of March 31, 2016, the company has completed 82% of the three-year 1.5 billion euro share buyback program.

Koninklijke Philips also prepared for an IPO (initial public offering) or a private sale of Philips Lighting. With current market developments, the company is focusing on the IPO for this business segment. The company expects separation costs in the range of 200 million–225 million euros for 2016.

For ongoing analysis of this sector, visit Market Realist’s Consumer Discretionary page.

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