From Morningstar: 2024-04-29 05:32:00

Shares in Philips are up 30% following a $1.1 billion settlement in US lawsuits over personal injury claims and with the medical regulator, creating a €982 million provision. Philips also expects €540 million from insurers, ending legal uncertainties. Morningstar notes investors may have anticipated a higher settlement amount, resulting in a share price bounce of 33% to €26.29.

However, Philips faces an order intake squeeze, with China being the primary cause. Order intake has declined for the seventh consecutive quarter, while a provision for the US settlement led to a net loss of €998 million in the first quarter. Excluding China, order intake actually grew.

Philips has raised its free cash flow expectation for 2024 to €900-1.1 billion, excluding the settlement payout. Sales growth and adjusted EBITDA margin are projected to be 3-5% and 11-15%, respectively. Morningstar maintains a Fair Value estimate of €21 per share, citing long-term headwinds and reputational damage.

The article highlights that while the settlement is positive news, Philips will face long-term challenges and reputational damage. A multi-year consent decree with US medical authorities will prevent the sale of new devices for several years, resulting in a permanent loss of market share. The article was initially published in Dutch and adapted for UK audiences.



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