AMSTERDAM - Dutch conglomerate Philips Electronics is set to give a new timeline for reaching its mid-term targets in the coming weeks, a move which could boost its shares as much as 10 percent, analysts said.
Philips' mid-term programme, dubbed Vision 2010, aimed to boost profits by acquisitions and cost cutting, but was abandoned in Dec. 2008 as Europe's biggest consumer electronics maker said it could not reach the targets on time.
Last month's bullish consumer lifestyle update, however, predicting ongoing sequential sales growth, has renewed analysts' hopes that the world's biggest lighting maker will give a target timeline at its fourth-quarter results on Jan. 25.
Analysts expect sales to rise 25 percent from the third quarter, while earnings before interest, taxes and amortization (EBITA) are seen rising to 46 percent.
We believe 2010 is likely to be a turnaround year with re-introduction of (the) timeline for Vision 2010 margin targets, analyst Margarita Shevtsova at Keijser Capital said.
A re-introduction would impact the group's 20 billion euro ($28.41 billion) market value positively, ING's Jan Hein de Vroe said.
Reinstatement of the plan could add 20-25 percent to our 2011 and 2012 earnings per share estimates, De Vroe said, adding that an announcement next week could add about 5 percent to 10 percent to the company's share price.
Philips stock rose around 50 percent in 2009, slightly underperforming the Amsterdam blue-chip index .AEX, which rose almost 60 percent in the same period.
STICK TO THE PLAN, NEW TIMELINE
In its original plan, Philips targeted a group EBITA margin of 10 percent to 11 percent, annual average comparable sales growth of 6 percent and a return-on-invested-capital of 12 percent to 13 percent by the end of 2010.
At unit level it wanted 2010 EBITA margins of 15 percent to 17 percent for healthcare, 8 percent to 10 percent for consumer lifestyle and, for lighting, 12 percent to 14 percent.
De Vroe expects Philips will stick to the original margin targets and give a new target date to achieve them, possibly 2011 or 2012.
SNS Securities analyst Victor Bareno expects that the consumer lifestyle could meet its original margin target this year, though.
Philips is shifting focus from restructuring to growth again. We expect the company to become more specific about the divisional targets with the full-year results, he said.
However, while Philips has said a fresh target timeline is high on its agenda, it would prefer to wait for retail data from the U.S. holiday shopping season, as well as the Chinese new year at end-Feb.
Also hampering Philips' ability to issue a new target timeline is the performance of its healthcare unit, a top-three hospital equipment maker.
The unit has suffered a severe blow from the credit crisis in the United States, where hospitals have cut back on big ticket items such as brain scanners, because of difficult financing conditions.
Third-quarter sales at the healthcare business fell 4 percent, pressured by the U.S. imaging unit, patient monitoring and clinical care systems. Sales in the second quarter of 2009 fell 5 percent, while the order intake fell 9 percent. ($1=.7040 Euro) (Editing by Simon Jessop)