NEW YORK (TheStreet) -- Koninklijke Philips NV (PHG), the Dutch lighting and healthcare company, will merge its Lumileds LED components and automotive lighting divisions into a standalone subsidiary which could potentially be spun off, Reuters reports.
Philips said its lighting division would remain a key customer for the new subsidiary but that it would look for third-party investors. It did not rule out becoming a minority shareholder in the business, which could also be floated, Reuters said.
Shares of Philips are up 2.72% to $31.30 in pre-market trading.
TheStreet Ratings team rates KONINKLIJKE PHILIPS NV as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:
"We rate KONINKLIJKE PHILIPS NV (PHG) a HOLD. The primary factors that have impacted our rating are mixed some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels and good cash flow from operations. However, as a counter to these strengths, we find that the growth in the company's net income has been quite unimpressive."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- PHG's revenue growth has slightly outpaced the industry average of 0.6%. Since the same quarter one year prior, revenues slightly increased by 2.6%. This growth in revenue does not appear to have trickled down to the company's bottom line, displaying stagnant earnings per share.
- The current debt-to-equity ratio, 0.34, is low and is below the industry average, implying that there has been successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.78 is somewhat weak and could be cause for future problems.
- Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. We feel that the combination of its price rise over the last year and its current price-to-earnings ratio relative to its industry tend to reduce its upside potential.
- The change in net income from the same quarter one year ago has exceeded that of the Industrial Conglomerates industry average, but is less than that of the S&P 500. The net income has decreased by 7.8% when compared to the same quarter one year ago, dropping from $206.34 million to $190.12 million.
- You can view the full analysis from the report here: PHG Ratings Report