Philips Optimistic On Long-Term Growth Despite Woes

Earlier this month, Koninklijke Philips N.V.’s (PHG - Free Report) President and CEO, Frans van Houten, had expressed discontent about the pace of adoption of connected care products. This is particularly alarming, considering the premium health-service provider has concertedly streamlined its massive business empire to focus mainly on healthcare.

The company believes that the present structure of insurance institutions, which focuses on reimbursing critical care and not prevention of incidents, has played a major spoilsport in thwarting investments. Despite these concerns, Houten remains bullish that long-term growth drivers are intact and the upcoming quarters should witness a rebound in connected-care businesses.

Shares of the company have returned 22.7% in the last six months, outperforming the Zacks categorized Products-Miscellaneous industry’s average gain of 14.5%. Also, the consensus analyst community is showing favor toward the stock as the Zacks Consensus Estimate for full-year 2017 earnings has inched up from $1.56 to $1.57, supported by one upward estimate revisions versus zero downward. 

Read on to take a closer look on the long-term growth drivers and the major profit churners for this Zacks Rank #3 (Hold) company.

Growth Drivers

Philips remains optimistic about the prospects of its Diagnosis & Treatment vertical on account of positive industry trends as Image-Guided Therapy and Ultrasound equipment sales are acting as major profit churners. To make the most of these favorable trends, the company recently launched the Philips Azurion, its next-generation image-guided therapy platform, to boost sales.

Overall, the company is optimistic that higher levels of quality and regulatory expenditure in the first half of 2017 will drive growth for this vertical. Also, Philips has been focusing on bolt-on acquisitions to fortify its core business. Previously acquired companies, including the Volcano and PathXL, have been contributing significantly toward the company’s sales.

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