Philips opened 15% down on Wednesday: here’s the catalyst

Shares of Koninklijke Philips NV (NYSE: PHG) slipped nearly 20% this morning after the health technology company predicted a 40% decline in Q4 core profit.

Philips blames supply constraints

Philips now forecast roughly $5.57 billion in comparable sales for its fiscal fourth quarter that translates to nearly $0.40 billion lower than its previous estimate. The Dutch multinational blamed supply constraints for the dovish outlook. CEO Frans van Houten said:

For the full financial year, it is now calling for a 1.0% annualised decline in comparable sales to $19.60 billion. Another hit came from the recall of ventilators that Philips said resulted in $225 million of additional cost in Q4.

Adjusted EBITA will likely come in at $2.39 billion this year, including $741 million in the fourth quarter. In total, Philips sees close to $479 million in charges for Q4 – a massive increase of $359 million from its previous forecast.

Comparable order intake was up 4.0%

On the plus side, the NYSE-listed company said its diagnosis and treatment segment noted a double-digit growth in the fourth quarter, resulting in a 4.0% increase in comparable order intake. According to CEO Houten:

The chief executive warned that supply-wise, things will continue to be difficult in the first half of 2022 but expressed confidence that growth will resume thereafter.