What happened
Shares in medical technology company Koninklijke Philips (PHG -0.89%) fell by 8.5% in the week to Friday morning. The move came after yet another disappointing earnings report from the company. In short, it's been a tough year for Philips. In addition to high-profile product recalls of some of its sleep apnea machines and ventilators, delays in elective procedures negatively impacted its sales growth. If that wasn't bad enough, supply chain challenges have been more significant than expected and have dented sales growth as well.
Philips is not alone in experiencing supply chain difficulties; for example, peer General Electric's (GE -0.69%) healthcare segment has also seen its sales growth held back by similar obstacles, and management has reduced its full-year segment profit guidance from between $3.1 billion and $3.3 billion to about $3 billion.
So what
Investors in the healthcare company hope that easing supply chain difficulties and a settlement agreement over product recalls will draw a line in the sand and enable Philips to generate sales and margin expansion in 2023.
However, there are plenty of other ways to invest in the theme of improving supply chain conditions creating a better environment for healthcare companies. That's a critical consideration given that Philips' operational mishaps and disappointing guidance have damaged investor confidence. It will take time to rebuild that trust.
Now what
Philips needs to stabilize the ship, at least in terms of its earnings expectations over the next few quarters. That would help restore investor confidence, and thoughts could then turn to its highly attractive valuation. The problem is that it's hard for investors to believe in the numbers when Philips keeps reporting disappointing results.
