Dutch multinational conglomerate Koninklijke Philips (NYSE:PHG) slid in pre-market trading after revealing its fourth quarter and FY23 results. The company also announced that it had reached a settlement with the U.S. Food and Drug Administration (FDA) over the recall of its ventilators. The firm set aside €363 million in provisions during the fourth quarter due to the expected settlement cost. This equates to 1% of the company’s expected FY24 revenues.
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A consent decree, which outlines the changes needed at Philips Respironics plants for device sales in the U.S., is being finalized and will be submitted to the U.S. Court for approval. Philips stated that the sale of respiratory care devices like Respironics will be halted in the U.S. until the finalization of the decree, and the company remains committed to complying with the decree.
The healthcare giant suffered a huge setback in 2021 as it was forced to recall millions of sleep therapy devices and ventilators used to treat sleep apnea because it was found that the foam used to dampen noise from the devices could become toxic and carry potential cancer risks.
The company added that its agreement with the FDA was unlikely to impact its 2025 comparable sales growth of a mid-single-digit percentage and a profit margin in the low teens. In FY24, Philips expects to deliver comparable sales growth of 3% to 5%, while adjusted EBITA margin is likely to be between 11% and 11.5%. In addition, free cash flow in FY24 will likely range from €0.8 to €1 billion.
In the fourth quarter, the company reported an adjusted EBITA of €653 million, with a 1% dip in comparable sales. Furthermore, Philips posted revenues of €5.06 billion in Q4. For reference, analysts had estimated adjusted EBITA at €672 million with sales growth of 2.6%.
Is PHG a Good Stock to Buy?
Over the past year, PHG stock has soared by more than 30%. Over the past three months, only one analyst has covered PHG and is bearish on the stock with a Sell rating and a PHG price target of $20.06, implying a downside potential of 11.86% at current levels.
