Philips snafu may prompt valuation health check

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Philips CEO Frans van Houten is pictured in Amsterdam, Netherlands, January 29, 2019. REUTERS/Eva Plevier

LONDON, June 14 (Reuters Breakingviews) - Koninklijke Philips’ (PHG.AS) Chief Executive Frans van Houten has been making up ground on rival medical-technology group Siemens Healthineers (SHLG.DE). Offloading the 40 billion euro company’s domestic appliances business read more and buying heart-monitoring specialist BioTelemetry helped investors focus on the core message: the Dutch group sells market-leading kit in a fast-growing sector. Its valuation discount to its German rival almost disappeared in recent weeks: as recently as early 2021, Philips traded on a forward price-earnings multiple that was around 20% lower.

An unpleasant surprise on Monday morning threatens to interrupt that progress. Philips is recalling some old ventilators and breathing-aid devices for troubled sleepers read more , because certain foam parts could degrade into potentially carcinogenic particles. Van Houten kept full-year financial targets in place, but the company’s market value still dropped 4%. Investors might conclude that Philips’ product-safety checks are subpar, raising the risk of costly future snafus. That would complicate an otherwise healthy equity story. (By Liam Proud)

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