Investing.com – Philips (AS:) reported third-quarter results that showed a revenue loss and revised guidance, mainly due to weaker demand in China.
Sales were 3% below consensus, and order intake fell 2% after a strong quarter last quarter. While adjusted EBITA was in line with expectations, UBS analysts said this figure was boosted by unusually high royalty income.
Without this benefit, the adjusted EBITA would have lost 8%. The overall disappointing turnover figure has led to concerns about Philips’ growth. Management lowered its full-year revenue growth forecast from an expected 3%-5% to a range of 0.5-1.5%.
This revision reflects increased uncertainty, especially in China where demand issues have increased.
UBS analysts noted underperformance in several Philips segments. Diagnosis & Treatment sales were 3% below consensus and showed only an organic decline of 1%, which fell short of the expected 2% growth.
Connected Care and Personal Health revenue both fell short of expectations, lagging forecasts by 3% and 7% respectively, and each registered no organic growth or decline compared to expected increases.
UBS noted that even with favorable revenue growth from royalties, underlying profitability remains under pressure.
The lowering of management expectations and the broader revenue decline have dampened investor sentiment. Analysts at UBS suggested this could lead to further scrutiny, especially given the company’s disappointing order intake after an already weak comparative period last year.
“We believe there was some hope for an increase in margins, but instead we are likely to expect 2-3% cuts to sales and EBITA. We see MSD shares disappearing, maybe a little more,” JP Morgan analysts said in a note.
