Philips Shares Jump As FY25 Margin Outlook Raised, Despite Weak Q2

Philips Electronics

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(RTTNews) - Shares of Royal Philips N.V. were surging around 10 percent in the morning trading in Amsterdam as well as in the pre-market activity on the NYSE, after the Dutch consumer electronics giant on Tuesday raised its fiscal 2025 margin outlook, benefited by lower tariff impact, and maintained fiscal 2025 comparable sales growth view.

Meanwhile, the company issued weak margin outlook for its third quarter after reporting sharply lower profit in its second quarter with weak sales, despite margin growth.

Separately, Philips announced a significant new multi-year contract with Indonesia's Ministry of Health to deliver its advanced Azurion image-guided therapy systems across the country. The initiative aims to expand access to cardiac, stroke, and cancer care across Indonesia's 38 provinces, including rural and remote areas.

Roy Jakobs, CEO of Royal Philips, said, "We are focused on driving profitable growth and delivering better care for more people. We built order intake growth momentum, supported by our recently launched AI-powered innovations. Sales improved, including accelerated Personal Health sales growth, and we delivered margin expansion through innovation and productivity. ...We increase our full year outlook for margin and free cash flow, including currently announced tariff levels, and we reiterate our comparable sales growth outlook as we continue to build order and sales momentum."

Looking ahead for the third quarter, Philips projects adjusted EBITA margin to be lower than in 2024 primarily due to tariff impact phasing.

For fiscal 2025, Philips now expects adjusted EBITA margin range to be 11.3 percent to 11.8 percent, a 50 basis points increase from previous outlook of 10.8 percent to 11.3 percent.

The outlook includes an estimated tariff impact of 150 million euros to 200 million euros after substantial mitigations, compared to 250 million euros to 300 million euros impact expected previously.

Comparable sales growth range is still expected at 1 percent to 3 percent with sequential improvement as the year progresses.

The outlook excludes ongoing Philips Respironics-related proceedings, including the investigation by the US Department of Justice.

Further, Philips said it is is on track to deliver on its three-year, 2.5 billion euros productivity program, including 800 million euros productivity savings in 2025.

In the second quarter, net income fell to 240 million euros from last year's 452 million euros. Earnings per share were 0.25 euro, down from 0.47 euro a year ago.

On a continuing operations basis, income was 242 million euros or 0.25 euro per share, compared to last year's 311 million euros or 0.32 euros per share.

Adjusted income from continuing operations were 0.36 euro, compared to 0.30 euro last year.

Adjusted EBITA margin increased 130 basis points from last year to 12.4 percent of sales, driven by higher gross margin from innovation, product mix and productivity measures that more than offset the initial impact of increased tariffs and currency headwinds.

Adjusted EBITDA grew to 747 million euros from 733 million euros last year. Adjusted EBITDA margin improved to 17.2 percent from 16.4 percent a year ago.

Group sales were 4.34 billion euros, 3 percent lower than prior year's 4.46 billion euros.

Sales from Mature geographies dropped 3 percent year-over-year to 3.16 billion euros with weak results in all regions. Growth geographies' sales were down 2 percent to 1.18 billion euros.

Group comparable sales increased 1 percent, and comparable order intake increased 6 percent. The company noted that the 6 percent comparable growth in Personal Health was offset by a 1 percent decline both in Connected Care and Diagnosis & Treatment.

On a comparable basis, sales in Mature geographies were flat, while growth geographies showed low-single-digit growth, despite a decline in China.

In Amsterdam, Philips shares were trading at 24.23 euros, up 9.64 percent.

In pre-market activity on the NYSE, the shares were at $28.16, 9.72 percent higher.

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