Philips Bags Healthcare Contract - Analyst Blog

Philips Healthcare, a division of Koninklijke Philips Electronics NV (PHG), has been awarded a $77.2 million contract to provide patient-monitoring systems for the U.S. Department of Defense. 

Philips will supply the DOD with the systems along with accessories, consumables and spare parts. The company will also provide training on the systems. The project is financed by the DOD’s Defense Logistics Agency, and the equipment will be utilized both by the armed forces as well as civilian agencies. 

The restructuring of its product portfolio to better position itself as a more-focused company in the healthcare, lighting and lifestyle markets is currently underway with several focused acquisitions and divestments in the most recent quarter. This bodes well for the company going forward. 

The company’s continued ability to increase cash flow by bringing down working capital has helped sustain investments in growth initiatives while maintaining a strong balance sheet.
 
Working capital parameters expressed in days of sales, inventories and payables continued to improve. There was progress in managing its costs, particularly the structural savings and fixed costs. 

Philips may be unable to adapt swiftly to industry or market circumstances, which could have material impact on its financial condition. Acquisitions could expose the company to integration risks and pose a management challenge. 

Philips’ global presence exposes the company to regional and local regulatory rules that may interfere with the realization of business opportunities and investments in the countries in which it operates. Philips’ overall performance in the coming years is dependent on realizing its growth ambitions in emerging markets.
 
Philips’ Healthcare segment is the second largest manufacturer of medical diagnostic equipment, which includes X-ray, ultrasound, magnetic resonance, medical information technology (IT), nuclear medicine, patient monitoring, information management and resuscitation products, as well as a comprehensive range of services. 

We currently have a Neutral recommendation on Philips.
Read the full analyst report on "PHG"
Zacks Investment Research