Philips nabs 5% growth in HealthTech with connected care and informatics leading

Philips CEO Frans van Houten

Royal Philips ($PHG) may be starting to achieve the mid- to high-single-digit growth it previously articulated for its HealthTech portfolio. But Wall Street remained a bit skeptical as the disposal of its Lighting businesses continues to drag on, muddying the new story Philips is trying to focus on.

HealthTech businesses had 5% sales growth during the first quarter, up a bit from 4% in 2015. The company was led by the Connected Care & Health Informatics, which gained 9% last quarter. Philips has been active in this segment, rolling out new products and deals including a wireless vital sign patch that can transition to monitoring patients in the hospital to at home and a partnership with Hitachi last quarter for cloud-based image management.

"We continue to invest in organic growth opportunities as well as in partnerships that we expect will have great relevance for our existing and potential future customer base, and therefore driving future growth and profitability," said Frans van Houten, Philips chairman, president and CEO. Connected Care & Health Informatics includes patient monitoring, image archiving, digital pathology, population health and electronic ICU.

The other two core HealthTech segments, Diagnosis & Treatment and Personal Health, gained 5% and 6% respectively last quarter. Health & Wellness, which falls under the Personal Health umbrella, continued to hit double-digit growth.

The Personal Health business is focused on healthy lifestyles, preventative care and chronic disease management, including coaching apps and the Dream respiratory products that measure sleep rhythm and respiration. The Diagnostics & Treatment business encompasses imaging and deep learning applications, as well as minimally invasive treatments.

Van Houten highlighted a new major hospital deal from the first quarter: a 15-year $90 million agreement with Marin General Hospital for imaging systems, patient monitoring and clinical informatics solutions. Securing these sorts of massive, all-encompassing hospital partnerships are core to Philips' strategy moving forward.

Philips laid low on the topic of the disposal of its Lighting and Lumileds businesses. Both are expected to see a lot more activity soon. The company said it would update "shortly" on whether it would pursue a private sale or an IPO for Philips Lighting, although it noted that with improved market conditions suggest "an IPO increasingly appears a more likely outcome."

The company had previously said it would update on Lumileds in the second half. Van Houten noted only that the company is "engaging with third parties that have expressed interest in Lumileds" and will "provide more detail on this process when appropriate."

Philips shed 4% when it reported earnings on April 25 but ticked back up 2% in early trading the next day when it also announced that the FDA cleared its CT system for low-dose lung cancer screening. Its shares remain up about 9% for this year so far.

- here is the earnings release
- and here is the transcript