Philips (PHG) stock slid more than 4% in trading on Tuesday despite a moderate first quarter earnings report.
The company reported $4.7 billion in revenue, in line with Wall Street estimates. The company beat on adjusted earnings per share, reporting $0.28 per share versus a consensus of $0.25 cents per share.
Philips affirmed its 2025 sales guidance but cut profit in anticipation of a $280 million to $340 million impact from tariffs, CEO Roy Jakobs said Tuesday. The new estimated profit margin for the year is between 10.8% and 11.3%, compared to previous guidance of between 11.8% and 12.3%.
“The announced tariffs have an impact,” Jakobs told Yahoo Finance on Tuesday. “Not on sales, so we kept the sales guidance untouched because of the strong demand that we have. But we do reflect potential impact of the tariffs into our profit and cash guidance.”
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The Dutch medical device maker is the latest to estimate tariff impacts, as medtech companies were not exempted from Trump’s tariffs starting on April 2. The industry has been lobbying for a carve-out but has not been successful.
And with “reciprocal” tariffs between the US and China in place, Philips, for which China is an important market, is being heavily impacted. The US currently has a 145% tariff on Chinese imports, and China has levied a 125% tariff on US goods.
Jakobs said he is “talking with all governments,” including officials from the US and China, to reduce or eliminate the tariffs and their impact on business. But he does not want to preempt any moves, which is why the company guided down on profits for the year.
It’s also why the company is doubling down on its strategy to have supply chains localized for each of the markets — the US, Europe, and Asia — that it serves.
“The medical technology supply chain is a complex one. It doesn’t mean you can source all components from one country. Therefore, what we have been doing is bringing more of the components, more of the manufacturing, into these regions,” Jakobs said.
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The company already has 46 sites in the US and recently announced a new cardiac device manufacturing site in Minnesota.
Philips is “taking very stringent cost measures to also make sure that we don’t have to offset this with prices increases to our customers,” Jakobs said.
He said the company’s moves to regionalize its supply chain began a few years ago, during the pandemic, when it became evident there was a need to build resiliency against the types of supply chain interruptions in the early days of the pandemic.
