By Dominic Chopping

Shares in Royal Philips surged as much as 14% in early trade after the Dutch health-technology company raised full-year profitability and cash-flow guidance and lowered the estimated financial hit from tariffs for the year.

The company said Tuesday that it now expects a tariff impact of between 150 million and 200 million euros ($173.9 million-$231.8 million) for the year, from a previous estimate of 250 million to 300 million euros.

The new guidance follows an agreement between the U.S. and European Union on Sunday that means a 15% tariff will be applied to most goods entering the U.S. Philips now also expects tariffs on U.S.-China bilateral trade to be lower than it had previously modeled.

Mitigation measures have also helped drive down the tariff impact, mainly through productivity, cost and supply chain adjustments, though the company said it isn't passing on the higher tariff costs to consumers through pricing on a large scale.

The company has been ramping up its localized production footprint and supply chain in the U.S., China and Europe. It said 90% of what it sells in China is produced in the country, while in the U.S. it will continue to expand its footprint, Chief Executive Roy Jakobs said on a media call following the results.

Still, Philips continues to advocate for healthcare exemptions from any trade tariffs.

"We are asking to exempt the healthcare sector from any addition trade barriers, and that includes tariffs," Jakobs said. "That's something we have been arguing for since day one."

The company's adjusted earnings before interest, taxes and amortization margin is now expected at 11.3%-11.8%, from earlier guidance of 10.8%-11.3%. It expects net cash flow of 200 million to 400 million euros, having previously guided for a slightly positive figure.

Comparable sales growth range is still expected to land at between 1% and 3%, with sequential improvement as the year progresses.

Philips reported second-quarter comparable sales growth of 1% compared with a company-compiled consensus of a 0.4% fall.

Net profit was 240 million euros compared with 452 million euros for the comparable period a year earlier and a company-compiled consensus of 101 million euros.

Adjusted Ebita--one of the company's preferred metrics--was 540 million euros compared with consensus of 428 million euros, while its adjusted Ebita margin was 12.4% versus consensus at 9.9%.

Analysts at Jefferies said in a note to clients that it expects mid-single-digit hikes to consensus EPS expectations following the second-quarter earnings beat and increased margin outlook.

Write to Dominic Chopping at dominic.chopping@wsj.com

(END) Dow Jones Newswires

July 29, 2025 04:23 ET (08:23 GMT)

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