Philips stock price dips despite strong Q1 sales. Here’s why

By: Michael Harris
Michael Harris
Specialising in economics by academia, with a passion for financial trading, Michael Harris has been a regular contributor to… read more.
on Apr 26, 2021
  • Philips reported revenue of €3.8 billion for its first quarter to mark a 9% growth in the comparable sales
  • The company reported a loss of €34 million on the back of a €250 million provision Philips was forced to take
  • Philips stock price fell almost 4% today to trade below the €50 mark once again

Shares of Philips (AMS: PHIA) have plunged nearly 4% today despite the Dutch company reporting very strong first-quarter sales.

Fundamental analysis: Robust sales pave the way for a hike in 2021 guidance 

Philips reported revenue of €3.8 billion ($4.6 billion) for its first quarter to mark a 9% growth in the comparable sales. This is better than the 6% expected from the market analysts. 

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The company’s core business – Connected Care – saw a decline in order intake by 5% year-over-year, which is understandable and “anticipated” given the record orders recorded in Q1 last year amid the pandemic. 

“Our growth momentum is driven by our portfolio of innovative solutions, for example in the areas of precision diagnosis, image-guided therapy, and telehealth. Moreover, we continued to add long-term strategic partnerships with hospitals on the back of more than 50 new partnerships we signed in 2020,” said Frans van Houten, CEO of Philips, noted. 

The company reported a loss of €34 million on the back of a €250 million provision Philips was forced to take to address a component quality issue. On an adjusted basis, the Dutch company reported a profit of €139 million.

“Regretfully, we have identified a quality issue in a component that is used in certain sleep and respiratory care products, and are initiating all precautionary actions to address this issue, for which we have taken a EUR 250 million provision,” van Houten added.

Adjusted EBITA surged to €362 million to top the €208 million reported a year ago. Surveyed market analysts were expecting €326 million. As a result, Philips hiked its 2021 revenue guidance to now expect “low-to-mid-single-digit comparable sales growth.”

Technical analysis: Shares dip on a provision hit

Philips stock price fell almost 4% today to trade below the €50 mark once again after the company reported a €250 million hit to its income. Given the fact that shares of Philips were trading near the record highs, the risk/reward for the stock was tilted to the downside. 

Philips stock daily chart (TradingView)

Shares have therefore slipped to hit €48.00, which marks the 4-week low. A move lower stopped at the level that hosts the previous record high, set in February. A further push lower is likely to take the price action to the 100-DMA that trades now at €46.41.

Summary

Philips stock price fell almost 4% today to hit 4-week lows after the company said it took a €250 million hit to its income. Other than that, the company reported very strong sales growth for its first quarter. 

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