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Philip’s Shares Fall After Lowering Earnings Guidance

Shares in the Dutch conglomerate fell by 7.72% in pre-market trading after announcing that it was lowering its full-year earnings guidance.

Koninklijke Philips NV (NYSE: PHG), commonly referred to as Philips, is a Dutch multinational conglomerate. In pre-market trading, the company saw its shares slide by 7.72%. This was after announcing full-year comparable sales growth between 1% and 3% compared with a forecast of 5% to 6% earlier in the year. 

Philip’s Q2 Earnings Results

Philip’s reported group sales of €4.2 billion with a 7% comparable sales decline. This was mainly caused by continued supply shortages and prolonged lockdowns in China, while Q2 2021 saw comparable sales rise by 9%. The company’s operating income also fell by 87% year-over-year (YoY) to €11 million. In the quarterly report, CEO Frans Van Houten said:

“The impact of COVID lockdowns significantly affected our business in China, where comparable sales and order intake declined almost 30% in the quarter. Production in several of our factories, as well as those of our suppliers in China, was suspended for two months.”

This is bad news for investors, as the suspension of production for such a long time will have knock-on effects in the coming quarters. This will delay the company getting back on track to reach its normal output levels. This is already seen in the downward revisions to its revenue and income forecasts for 2022. 

Philip’s half-year results in 2022 underperformed its results in 2021. Net income fell by €363 million from €192 million in 2021 to a loss of €171 million this year. This was predominantly due to lower operational earnings, lower net income from discontinued operations, and running remediation costs in its Respironics segment. This marks the third quarter in a row that Philips has missed its earnings estimates, signaling that there are more issues with the company than the standard ones facing all multinational manufacturing companies.

How did Philip’s performance impact its share price?

So far today, the company has seen its share price fall by 7.68% to $20.44 as investors abandon the old conglomerate due to historic underperformance and lower earnings outlooks. Over the past seven months, the company’s share price decreased by 2.66 times more than the S&P 500 Index (NYSEARCA: VOO), indicating that investors have lost more confidence in Koninklijke Philips than in the U.S. market. 

At the time of writing, €1 was equivalent to $1.02.

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