(Updates share price in second paragraph.)
Sept. 30 (Bloomberg) -- Royal Philips Electronics NV dropped the most in six weeks in Amsterdam trading after HSBC Holdings Plc cut its earnings and stock-price estimates, citing “many” challenges for the Dutch household-appliance maker.
Philips fell as much as 97 cents, or 6.8 percent, to 13.16 euros, the biggest intraday drop since Aug. 18, and was down 4.7 percent as of 4:48 p.m. The stock has declined 41 percent this year, valuing the Amsterdam-based company at about 13.6 billion euros ($18.2 billion).
With more competitors in consumer electronics and lighting products, and with seemingly entrenched price erosion even in the less fragmented health-care business, the odds against Philips seem ’’overwhelming,’’ Colin Gibson, a London-based analyst, wrote in a research report today.
His sum-of-parts valuation of the stock is 12.50 euros, “suggesting we have not yet reached fundamental valuation ‘bedrock,’’ Gibson wrote. He cut his earnings-per share estimates by about 30 percent for 2012 and by 19 percent for 2013. The stock-price estimate was reduced to 15 euros from 16 euros.
Philips Chief Executive Officer Frans van Houten is seeking to restore investor confidence by deepening cost cuts to streamline the portfolio. The manufacturer, which is targeting savings of 800 million euros, has pulled out of television production, and is reviewing management layers and staffing as Van Houten tackles the company’s complexity.
HSBC predicts Philips will earn revenue of 22.5 billion euros this year and report a net loss of 330 million euros. The mean estimate of analysts surveyed by Bloomberg is for sales of 22.5 billion euros and a loss of about 471 million euros.
In lighting, where Philips is global market leader, the company will ‘‘find it difficult to pass price pressure up the supply chain as it owns its own supply chain in this business,’’ Gibson wrote.
The company’s presence in consumer markets makes it ‘‘more exposed to government austerity measures and to their impact on short-term growth in key European markets,’’ the analyst said. A risk of further health-care reimbursement cuts by governments and price erosion in the imaging equipment business could also weigh on results, HSBC said.
Philips has a target of increasing earnings before interest, taxes and amortization to 10 percent to 12 percent of revenue by 2013, on sales growth of 4 percent to 6 percent.
‘‘As a result of our efforts and despite economic challenges, we are confident that we can deliver our 2013 financial targets,’’ Van Houten said on Sept. 13. The company is aiming for an Ebita margin of 15 percent to 17 percent for its health-care subsidiary, while the goal for the lighting and consumer-lifestyle divisions is 8 percent to 10 percent.
--With assistance from Alexis Xydias in London. Editors: Tom Lavell, Benedikt Kammel
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