Shares of Koninklijke Philips (PHG 5.14%) fell 18.2% lower in October 2018, according to data from S&P Global Market Intelligence. The Dutch maker of consumer electronics and medical devices shares its third-quarter results last month, falling short of analyst views in a couple of important ways.
On Oct. 22, Philips announced that its third-quarter sales rose 3.8% year over year on 4% stronger comparable sales, landing at $4.94 billion. European analysts had been looking for slightly stronger revenue and 5.4% higher comps. On the bottom line, earnings fell 6% to $0.35 per share. Adjusted EBITDA profits rose 9% to $651 million, but analysts were expecting something closer to $670 million. Philips shares fell 11.5% over the next two days.
So the third quarter was a bit slow, but Philips' management didn't reduce full-year revenue and profit targets. In my eyes, that looks as if the company's leaders see an upturn in the quarter. Analysts at Deutsche Bank agree, calling Philips a "catalyst buy" two days after the modest earnings report. A temporary slowdown in personal health products looks like a mere speed bump as the company continues to experience fantastic growth in the diagnosis and treatment division.
All told, Philips shares seem to be poised for a quick turnaround when the fourth-quarter results are revealed. Otherwise, the management team needs to work on its short-term financial forecasting skills.