Philips Q4 Earnings Miss: Will Weak Outlook Drag the Stock Down?

Core Insights - Koninklijke Philips N.V. reported a loss of €0.36 per share in Q4 2024, a decline from €0.04 per share in the same quarter last year [1] - The company's sales decreased by 0.4% year-over-year to €5 billion, with comparable sales growing by 1% driven by the Connected Care segment [2] - A significant decline in demand from China has impacted the company's performance, leading to lowered guidance for 2025 [12] Financial Performance - Comparable order intake increased by 2% year-over-year despite a double-digit decline in China [3] - Sales in growth geographies declined by 9% year-over-year, while mature geographies showed mid-single-digit growth [3] - Gross margin expanded by 340 basis points to 38.9%, with adjusted EBITA rising by 4% year-over-year to €679 million [7][8] Segment Analysis - Diagnosis & Treatment revenues declined by 2.3% year-over-year to €2.44 billion, with a comparable sales decline of 1% [4] - Connected Care revenues increased by 5.4% year-over-year to €1.42 billion, benefiting from a low comparison base due to prior sales provisions [5] - Personal Health revenues fell by 3.9% year-over-year to €1.02 billion, primarily due to weakened consumer sentiment in China [5] Operational Efficiency - Total savings from productivity programs amounted to €163 million [8] - Adjusted EBITA margin for Diagnosis & Treatment expanded by 160 basis points to 12.1% [9] - Personal Health's adjusted EBITA margin contracted by 190 basis points to 18% [10] Balance Sheet Overview - As of December 31, 2024, cash and cash equivalents were €2.4 billion, up from €1.5 billion as of September 30, 2024 [11] - Total debt decreased to €7.639 billion from €8.032 billion in the previous quarter [11] - Free cash flow was €1.2 billion compared to €1.1 billion in the year-ago quarter [11] Future Guidance - Philips expects 1-3% growth in comparable sales for 2025, with adjusted EBITA margin projected to be between 11.8% and 12.3% [12] - Free cash flow before settlements is expected to be at the lower end of €1.4 billion to €1.6 billion [12]