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Has Philips' Healthcare Transformation Reignited Growth?

Skyward Investments profile picture
Skyward Investments


  • Update on Philips from my 2017 article.
  • Analysis of Philips three main segments.
  • What should you do?

I last wrote about Philips in July of 2017. The Dutch company had recently spun off its lighting division to focus on healthcare products and services. It had impressive increases in operating income in FY2016, with the Image-Guided Therapy division achieving double-digit growth. However, I also articulated my concern that the healthcare company was relying too much on cost-cutting to improve profitability, without expanding revenue to match its new focus on growth. I concluded my article by advising readers to hold off on purchasing shares until the 2017 annual report to see if the Image-Guided Therapy division had continued strong growth, since it seemed poised to be Philips’ growth engine.

Here are the business segments as we go into Philips’ performance in 2017.

(All images from Philips’ 2016 & 2017 Annual Reports, unless specified)

Personal Health

The Health & Wellness division (mother and child care, oral care) experienced a slowdown from double-digit growth in 2016 to high-single-digit growth in 2017. This was the only subdivision within Personal Health that experienced a decline in growth from the previous year, which points at the market saturation of the Sonicare toothbrush line. The company didn’t disclose any figures relating to revenue derived from oral care. They mentioned a gimmicky “breath analyzer” along with an all-in-one connected oral care platform, but without any numbers to compare, it looks like Health & Wellness division is struggling to maintain growth.

Next is Personal Care (male grooming, beauty), which had mid-single-digit growth in 2017–the same as 2016. The highlight is that the new OneBlade razor generated “EUR 10 million within 18 months of its launch,” according to the CEO. I found this deceptive, because OneBlade’s performance was given over the course of 1.5 years, and there was no mention of how the existing Norelco razor line performed. OneBlade was designed as a “hybrid styler” that would appeal to

ChartPHG data by YCharts

ChartPHG data by YCharts
However, when compared to Siemens (healthcare competitor), Philips is faring relatively better, and only slightly underperforming versus the S&P 500.

ChartPHG Short Interest data by YCharts

This article was written by

Skyward Investments profile picture
Investor with a focus on technology stocks.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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