Philips; Results Missed But FDA Deal Appears Positive

Philips (PHIA NA) issued 4Q23 results this morning, which missed on revenues and EBITA but has done a deal with US FDA over sleep apnea devices.

• 4Q23 revenues were EUR5.1bn (consensus: 5.3bn) with EBITA reported EUR653m (vs. consensus 715m). Organic revenue growth was 1% lower.
• The order book was 3% lower in 4Q23 but company guidance is for 3-5% sales growth in FY24 and an EBITA margin of 11-11.5% (better than FY23 of 10.6%). Considering FY23 sales guidance was 6-7% at Sep-23, this does appear a little disappointing and mgmt comments include “uncertainties remain”.
• Scrip dividend is being issued (minor credit positive) but the consent order with the FDA has to be viewed as bringing certainty (and therefore lower risk premium) to the Respironics business in the US.

Philips’ credit curve has traded tighter across January so evidently some hope already built into expectations (and the equity has outperformed the SXXP significantly in the last month). Its most liquid ’25 bond has traded all the way tight to Fresenius over the course of 2H23 (see graphic) but is indicating a little wider this morning.