Philips Electronics: Is the Glow Getting Brighter ?

In its article, " The Glow Is Getting Brighter " Barrons' highlights Koninklijke Philips Electronics (NYSE: PHG) the Dutch maker of light bulbs, shavers and MRI machines suggesting it finally looks ready to deliver some high-wattage results.  The article further cites the company, with a market value of $44 billion, made a series of smart moves by paring the company's businesses from an ungainly 24 to just four, slashing costs and pushing into emerging markets.

Additionally the segment discusses two acquisitions announced last year totaling 5.3 billion euros ($7.7 billion); Respironics (NASDAQ: RESP), for which Philips is shelling out €3.4 billion, which should boost the company's personal-health-care-equipment business with devices that look after respiratory problems, snoring, even insomnia. The deal is expected to more than double Philips' annual sales in personal health care, to €1.5 billion.  The other buy is Genlyte (NASDAQ: GLYT), a U.S. maker of mainly commercial lights. Genlyte's operating margins are close to 15%, which should raise Philips' total lighting margins to 12.2% from a current 11.1%.

Now the story sounds good as do most fundamental stories, however even with this aforementioned news known to the investing public the stock is still languishing near a 52 week low and with a FusionIQ technical rank of just 44 (out of a possible 100) we would suggest it is still too early in the turnaround to take part in a PHG recovery story As always we believe the best investment opportunities should have both strong technicals and supporting fundamentals, and clearly in the case of PHG only one discipline (fundamentals) see the stock as strong.


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