What happened

Shares of Koninklijke Philips (NYSE:PHG) 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.

So what

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.

A doctor is reading a medical scan film in front of an MRI machine.

Image source: Getty Images.

Now what

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.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.