NEW YORK (TheStreet) -- Shares of Koninklijke Philips NV (PHG) are up 2.55% to $30.91 in pre-market trade after the healthcare, consumer lifestyle, and lighting firm said it would split into two new companies and prepare its lighting business for a stand-alone future, marking a new phase in the overhaul of the Dutch conglomerate, according to MarketWatch.
Philips said its health care and consumer-lifestyle operations would be merged into a new company, called HealthTech, and that its lighting business would be moved into a separate legal structure, which could result in a spin off.
The companies, which will continue to carry the Philips brand, will be better positioned to deliver long-term growth, Philips said in a statement before an analyst conference.
TheStreet Ratings team rates KONINKLIJKE PHILIPS NV as a Buy with a ratings score of B+. TheStreet Ratings Team has this to say about their recommendation:
"We rate KONINKLIJKE PHILIPS NV (PHG) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its good cash flow from operations, largely solid financial position with reasonable debt levels by most measures, expanding profit margins and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Net operating cash flow has significantly increased by 1146.80% to $614.04 million when compared to the same quarter last year. In addition, KONINKLIJKE PHILIPS NV has also vastly surpassed the industry average cash flow growth rate of -21.37%.
- The current debt-to-equity ratio, 0.35, 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 0.76 is somewhat weak and could be cause for future problems.
- 46.82% is the gross profit margin for KONINKLIJKE PHILIPS NV which we consider to be strong. Regardless of PHG's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 4.58% trails the industry average.
- PHG, with its decline in revenue, slightly underperformed the industry average of 1.1%. Since the same quarter one year prior, revenues slightly dropped by 3.0%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. When compared to other companies in the Industrial Conglomerates industry and the overall market, KONINKLIJKE PHILIPS NV's return on equity is below that of both the industry average and the S&P 500.
- You can view the full analysis from the report here: PHG Ratings Report