Philips' (PHG.US) core profit indicators for Q3 still exceeded expectations after charging 288 million euros and relief measures dragged down net profit

The Zhitong Finance App learned that Philips (PHG.US)'s profit for the third quarter of 2026 was higher than expected, thanks to higher sales and stricter cost controls. According to financial reports, the company's sales were 4.393 billion euros, a nominal increase of 2% and a comparable increase of 3%, slightly lower than market expectations of about 4.41 billion euros; adjusted diluted earnings per share were 0.40 euros, compared to 0.36 euros in the same period last year.

Comparable orders increased 8%, driven by broad demand in the diagnosis and treatment business; adjusted EBITA was 569 million euros, profit margin 13.0%, an increase of 70 basis points year-on-year, significantly higher than market expectations of 11.9%; operating cash flow was 544 million euros, and free cash flow was 384 million euros, a significant year-on-year improvement.

One-off projects significantly dragged down book profits during the quarter: its subsidiary Respironics (Respironics) reached a principle settlement with the US Department of Justice on the ventilator recall. The company proposed 288 million euros, operating profit fell to 165 million euros, and net profit fell to 28 million euros.

CEO Roy Jacobs called this an “important step” in addressing the consequences of the recall, and the settlement is expected to be paid in the first quarter of 2027. Additionally, the Amsterdam Court of Appeal's Corporate Court in October rejected requests from some investors to initiate corporate governance investigations into the recall.

By business, comparable sales for diagnosis and treatment remained flat, and the increase in image-guided treatment was offset by a decline in accurate diagnosis. The company said it was mainly affected by the pace of ultrasound sales and the decline in sales in the Chinese market; connected care could increase by 5%; and personal health could increase by 8%.

The company reaffirms its guidance for the full year 2026: comparable sales growth of 3% to 4.5%, adjusted EBITA profit margin of 13.5% to 14.0% (including approximately 1 percentage point of US tariff refund revenue), and free cash flow of 1.5 billion to 1.7 billion euros.