Koninklijke Philips N.V (PHG) is expected to significantly benefit from the recent definitive merger deal with Volcano Corporation (VOLC), which has a leading position in both IVUS imaging and FFR measurements. With image-guided therapies gaining popularity by the day, Philips is expected to gain economies of scale, cost reductions and delivering innovative diagnostics and therapies in the coronary and peripheral markets.
Additionally, in September, Philips decided to split the company as HealthTech – comprising its healthcare and consumer lifestyle segments, while its lighting business will operate as a stand-alone business. The strategic decision is aimed at streamlining the company’s operations and increasing focus on higher-margin areas.
However, given the company’s diverse international presence, Phillips is highly exposed to currency volatility. The company has been impacted by currency headwinds over the past few quarters, which is expected to continue through fiscal 2015. Additionally, Phillips has been struggling with weak operational performance for the past few quarters, after a modest revival in the second half of fiscal 2013. The company has been facing issues like continued sluggishness in key markets such as China and Russia. If such uncertainties persist, Philips’ financials will be affected in the long term.
To gain deeper insight into Philips, you can refer to our updated research report, which was issued on Dec 26, 2014.
Over the last seven days, the Zacks Consensus Estimate for 2014 earnings per share dipped by a penny to 69 cents. Nevertheless, for 2015, it rose by 16 cents to $1.63. The stock currently has a Zacks Rank #4 (Sell).
Stocks that Warrant a Look
Better-ranked stocks in the sector include Control4 Corporation (CTRL) and GigOptix, Inc. (GIG). Both stocks hold a Zacks Rank #2 (Buy).
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