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Philips Disappoints, but Remains Optimistic

Surging demand for scanners and medical equipment are expected to prop up the manufacturing sector’s stock. Because of this, electrical equipment maker Philips believes that it expects earnings to rebound during the second half of 2020.

In the same announcement, the Dutch company said core earnings fell by almost a quarter from April to June. Sales had dropped by 6% or 418 million euros when it recorded 4.4 billion euros during the coronavirus pandemic.

Fortunately for the company and its investors, results proved better than expected. Against the market’s consensus of 0.21 euros earnings per share, it went up to 0.35 euros instead. Moreover, it saw a better 5.03 billion-euro revenue against estimates of 4.89 billion euros.

Now, analysts predict that its adjusted EBITA for the second quarter would drop to 344 million euros. Meanwhile, sales would result in 4.34 billion euros.

Chief Executive Frans van Houten said that the company aims for a “modest” comparable sales growth for end-2020. There would then also be an adjusted EBITA margin improvement.

During the first quarter, Philips had seen a 23% rise in orders. Signs pointed to a better figure this year in comparison to Q1 2019, which saw an 8% increase instead. Of course, this was led by coronavirus-related equipment demand.

 

Philips on Its Long-Term Growth

When talking about a longer-term outlook, van Houten emphasized the need for its products linked to the aftermath of the pandemic. Hospitals are now looking at ways to better deal with highly infectious diseases.

He then said that Philips could enable careworkers to remotely monitor patients. After all, this is the core purpose of the company: to make better use of patient data and internet technology.

If possible, the equipment maker’s products could enable coronavirus patients to remain at home.

Hospitals want to create a more resilient infrastructure to treat more patients at a time. These could also open a variety of ways to treat them, as elective procedures could continue and use them.

It looks like the stock market is looking forward to this improvement. The news brought the company’s stocks up by 4.3% during the morning trade in Europe. Notably, the firm became the only winner in Amsterdam’s AEX index.

Philips shares have also increased in recent months to levels last seen in December 2019. This followed the losses seen during the first quarter of 2020 when it lost over a third of their value.

ING analyst Marc Hesselink said he is looking forward to the company’s outlook for the year. However, investors should still look out for recoveries in China and its effect on Philips stock.

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