Royal Philips (NYSE:PHG) shares closed up today in Amsterdam and had gained nearly 5% on Wall Street after the Dutch healthcare conglomerate reported better-than-expected profit numbers for the first quarter.
Philips posted profits of €124 million ($151.5 million), or €0.13 per share, on sales of €3.94 billion ($4.81 billion), for a bottom-line slide of -52.1% compared with Q1 2017. But adjusted earnings before interest, tax & amortization were €344 million ($420.2 million), well above analysts’ consensus for adjusted EBITA of €332 million ($405.5 million).
That sent PHIA.AS shares up 5.3% to a €34.67 close today in Amsterdam; in New York, PHG shares were up 4.5% to $42.42 apiece today in mid-day activity.
“We saw very good order growth in diagnosis and treatment across the three business units there, notably diagnostic imaging, ultrasound and image-guided therapy. What drove it was a slate of innovations that we launched in the second half of last year. Basically, we have renewed 70% of the product portfolio and that is appealing to the markets, to the customers. Moreover, I think we have really made a step forward in embedding artificial intelligence and informatics in conjunction with the imaging modalities, and thereby being able to drive productivity, both in terms of diagnostic outcomes, the precision of the diagnosis as well as the improved utilization,” CEO Frans van Houten told MassDevice.com this morning in a telephone interview. “By way of example, in an Azurion cath lab, on average, one to two patients a day extra can be treated. That’s big. In our new MRI machine, the diagnosis time is reduced by 50%. That’s another good example. Maybe a third example, in our OB/GYN ultrasound systems, we have included an embedded anatomical intelligence so that also less experienced operators are being guided as to a first-time-right diagnosis. Across the broad, I think people see Philips as committed to health technology and being committed to them, and this confidence or regained confidence is helping us gain market share, and that’s pretty cool.”
In prepared remarks, van Houten re-stated Philips’ outlook for of comparable annual sales growth of 4% to 6% and an average annual 100-basis-point improvement in adjusted EBITA margin for the 2017 to 2020.
Consent decree with FDA over AEDs delivers $24m blow; China trade war could deliver another
Philips said the consent decree it inked last fall with the FDA, banning automated external defibrillator production at facilities in Massachusetts and Washington state until they return to compliance with FDA regulations, delivered a €20 million ($24.4 million) charge for the quarter. Shipment of some AEDs overseas is back under way, the company said today.
“Philips continues to make progress in line with the terms of the consent decree, which is primarily focused on the defibrillator manufacturing in the U.S.; this included inspections by independent auditors and resumption of shipments of its FRx and FR3 AEDs to markets outside of the U.S.,” the company said.
Philips is also keeping a wary eye on the potential for a trade war between the U.S. and China, which drove some of the company’s strongest growth during the quarter.
“So far the effects are modest, but we are worried about the trade tensions,” van Houten told Reuters. “We don’t expect any tariffs to be imposed on medical equipment, but we see indirect effects through the rising cost of commodities such as aluminum and steel. We can’t isolate ourselves from that, nor from the effects on economic confidence overall.”
($1 = €0.818737)
Sarah Faulkner contributed to this report.
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