Dutch med-tech conglomerate Philips (NYSE:PHG) is an interesting position right now. The company has reaped some benefit from the COVID-19 pandemic in its ventilator and monitoring business, and the company’s image-guided therapies business should be levered to the profitable elective procedure growth that hospitals want to encourage, but imaging is going to be under pressure a little while longer on strained hospital capex budgets. At the same time, the company is exiting a multiyear period of impressive gross margin improvement, but still has work to do on SG&A and R&D.
Even with concerns about an overhang in the imaging business, I went positive on Philips in early September, and the shares have risen about 10% since then, beating the market and the med-tech space over that small period. I’m still pretty bullish on these shares; I’d like to see more leverage to the sorts of elective procedures that hospitals are keen to grow, but I also do see meaningful operating margin improvement potential that doesn’t seem to be in the share price.
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Philips Still Reaping A COVID-19 Tailwind, As Procedure Counts Recover
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