Philips shares surge on strong Q2 growth and positive outlook

Investing.com -- Koninklijke Philips NV (AS:PHG)  shares jumped on Monday after the company reported a positive second quarter with growth in sales, margins, and order intake. 

The Dutch conglomerate reported growth in order intake, improved margins, and a positive sales trajectory, underscoring its resilience and strategic prowess amidst a challenging macroeconomic environment.

Philips reiterated its outlook for the full year 2024, expecting 3-5% comparable sales growth, an adjusted EBITA margin of 11-11.5%, and free cash flow of EUR 0.9-1.1 billion.

Second-Quarter Highlights

Philips reported group sales reaching EUR 4.5 billion, marking a 2% growth in comparable sales. The company also saw a 9% increase in comparable order intake, reflecting its strong market presence and customer demand. 

Income from operations stood at EUR 816 million, bolstered by EUR 538 million from insurance income, while the adjusted EBITA margin improved to 11.1% of sales. Additionally, Philips reported an operating cash inflow of EUR 89 million, despite a free cash outflow of EUR 64 million.

Despite the challenging macroeconomic conditions, Philips managed to achieve significant margin improvement through its productivity programs and solid operational cash flow, said Roy Jakobs, CEO of Royal Philip in a statement.

Group and Segment Performance

In the Diagnosis&Treatment segment, Philips saw a 4% increase in comparable sales, building on double-digit growth from Q2 2023. This growth was driven by advancements in Image Guided Therapy and Precision Diagnosis, leading to an improved adjusted EBITA margin of 12.2%.

The Connected Care segment reported a 2% rise in comparable sales, fueled by strong performance in Enterprise Informatics, although Monitoring sales remained flat. The segment’s adjusted EBITA margin improved to 8.8%, driven by productivity measures and pricing strategies.

The Personal Health segment also saw a 2% increase in comparable sales, primarily outside of China. The adjusted EBITA margin for this segment improved to 16.9%, reflecting operational improvements and productivity measures.

Philips achieved total productivity savings of EUR 195 million in the quarter, including EUR 57 million from operating model savings, EUR 71 million from procurement savings, and EUR 67 million from other programs. 

Capital Allocation

In the second quarter, Philips completed a EUR 1.5 billion share repurchase program and distributed a dividend of EUR 0.85 per common share. Following these actions, the total number of issued shares amounts to 939,939,384 common shares.