Shares of Koninklijke Philips NV (PHG 2.11%) had sunk by 11.2% as of 11:32 a.m. ET Wednesday. The steep decline came after the Dutch healthcare company provided an early update on its third-quarter results and full-year outlook. Philips will deliver its official Q3 results on Oct. 24.
Investors were most concerned about Philips' announcement that it expects to record a goodwill impairment of 1.3 billion euros in the third quarter. The anticipated write-down stems from a lower sales forecast for the company's sleep and respiratory care business.
Earlier this year, the U.S. Department of Justice issued a subpoena to Philips related to the company's recall of its sleep apnea and ventilator machines. Then in July, the Justice Department proposed a consent decree -- a settlement agreement approved by a court that would not require any party to admit liability.
Philips Chief Financial Officer Abhijit Bhattacharya stated in the company's conference call on Wednesday that discussions with Justice about this proposed consent decree are ongoing. He said that the company wouldn't speculate on whether or not an agreement would be reached. However, the expected 1.3 billion euro write-down is due largely to the estimated impact of the proposed consent decree.
This wasn't the only concerning revelation in Philips' sneak peek at its Q3 results, though. The company also said that sales were expected to fall by close to 5% year over year to 4.3 billion euros, primarily due to "continued supply chain challenges that were more significant than anticipated."
Philips' share price has been sinking like a brick. The healthcare stock is now down more than 60% year to date. Management thinks that some of the headwinds impacting the company should ease next year. However, they're not confident about how soon in 2023 that relief might come.