Why Philips' Stock Is Trading Higher In Pre-Market Today

Koninklijke Philips NV (NYSE: PHG), delivered an earnings surprise in the third-quarter 2020 on Monday. Non-GAAP earnings per share of €0.60 beat consensus of €0.46. The company reported quarterly revenues of €5 billion, exceeding the consensus by €200 million. GAAP diluted EPS from continuing operations was €0.37 per share.

Key Highlights for Q3: Philips clocked 6% nominal year-over-year sales growth, driven by Philips’ Diagnosis and Treatment business contributing approximately 39.5% to the total turnover, followed by the Connected Care business contributing 31%. 

Income from continuing operations rose to €341 million at a 61.6% growth rate year-over-year. Adjusted EBITDA margin improved to 15.4%, against 12.4% in the third quarter of 2019.

At the end of the quarter, the company held a cash balance of €2.49 billion.

Partial termination of a ventilator contract with the Department of Health and Human Services in August led to an 18% fall in order intakes. Excluding the impact of the partial termination, there was a 3% rise in comparable order intakes.

Outlook: In early November, the company plans to announce a strategic and performance update for the next five year period from 2021 to 2025.

Based on management estimates for 2021, comparable sales are expected to grow at a low single-digit rate and the adjusted EBITDA margins are expected to improve between 60 to 80 basis points.

Philips forecasts annual comparable sales growth of 5% to 6% between 2021 and 2025.

Price Action: PHG shares are trading 2.38% higher to $49.97 in the pre-market session Monday, after surging 3.76% Friday.

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