Philips (PHG) ADRs slumped by 6% on Monday, signaling the second largest intraday decline of the year. The drop came after the company revealed a decrease in comparable order intake, despite raising its full-year outlook in its Q2 2023 results.
Although the Dutch medical device maker delivered moderate top- and bottom-line results for the quarter, with group sales reaching approximately EUR 4.5 billion (~$5.0 billion) and a year-on-year comparable sales growth of around 9%, the decline in comparable order intake is a cause for concern. Adjusted EBITA margin also improved to around 10% from 5% a year ago.
The order book did show a 3% year-on-year expansion; however, comparable order intake experienced an 8% decline compared to the previous year (excluding Russia), marking the fourth consecutive quarterly decline following strong order intake in the same quarter last year.
Nevertheless, Philips asserted that the current order intake remains significantly better than the pre-COVID levels. Its rival in the respiratory care market, ResMed (RMD), also saw a decline in its stock prices following two consecutive sessions of gains.
In terms of business segments, Connected Care experienced a 6% year-on-year improvement in comparable sales, while Sleep & Respiratory Care observed a decline as demand normalized after robust growth in 2021 and 2022.
Looking ahead to 2023, Philips projects mid-single-digit growth in comparable sales and expects its adjusted EBITA margin to sit at the upper end of the high-single-digit range. Previously, the company had estimated low single-digit growth in revenue and high single-digit growth in adjusted EBITA.
Philips also provided an update regarding the previously announced recall of sleep care devices. The company reported that it has manufactured 99% of the replacement devices and repair kits required to address the recall.
It remains to be seen how Philips will navigate the challenges in its order intake and maintain its growth trajectory. As the market and consumer demands continue to evolve, it will be interesting to observe how the company adapts and strategizes to ensure long-term success and sustainability.
