Growth in two of the world’s largest markets bodes well for one of the newest additions to GIE, Royal Philips (NYSE: PHG), which gets roughly 58% of its business from North America and Western Europe.

Last year the European Union continued to dig itself out of recession and posted 1.5% growth despite the economic troubles in China. This recovery is expected to improve further this year to 1.7%. And, of course, here in the United States the economy is chugging along, growing 2.4% in 2015, and is expected to pick up steam this year.

The company is on a roll; in 2015 higher demand from the U.S. and E.U. drove Philips’ 55% profits surge to $700 million, as revenues increased 2% to $27.2 billion. This was almost a complete turnaround from 2014, when the company’s bottom line took a hit of 66% after its businesses suffered in China and Russia.

Healthcare is Philips’ largest division, representing about 46% of revenue. The segment offers diagnostic imaging systems and consulting services. Recently, the company added lucrative long-term agreements with hospitals to provide managed equipment services, which generate stable revenue.

Its consumer lifestyle unit sells electric shavers and toothbrushes as well as TVs and Blu-ray players. The company’s sale of men’s grooming products in China helped drive the consumer segment’s growth last year. The division generated about 23% of its revenue in 2015.

Philips’ lighting division, about 31% of revenue, is the world’s leader in light-emitting diode (LED) and conventional lighting. The segment owns the largest market share in every region and roughly 38% of the global lamp market.

Philips ended 2015 on a strong note, with fourth-quarter adjusted earnings before interest and taxes (its measure of operating performance) rising 13% to $914 million. Total revenue for the quarter rose 9%, driven by its two key markets, as well as its largest developing market, China.

The most positive result came from the company’s healthcare segment, which recorded a comparable equipment order increase of 15%, with revenue up 3% on a constant currency basis. Consumer lifestyle revenue grew 6% versus the prior year’s quarter.

Philips’ lighting division posted a 2% drop in revenue, the result of declining demand for conventional incandescent lightbulbs, but the division realized a 19% increase in adjusted operating profit due to reduced costs and stronger LED sales.

Switching Off the Lights

Management has long wanted to exit its historic lighting business as part of a wider strategic overhaul that would allow Philips to concentrate on its more profitable and faster-growing healthcare technology business.

Last March, the company announced it sold an 80% stake in its lighting business to a consortium of Chinese buyers for $2.9 billion, but last month the U.S. Committee on Foreign Investment opposed the deal because of national security concerns.

The division still garnered the interest of other suitors like fellow GIE holding KKR, CVC Capital Partners and Onex, all of which are currently bidding on either Philips’s entire lighting business or pieces of it. Management expects to divest the lighting division by the second half of this year.

Healthcare Future

Economic stability in its two key markets supports Philips’ current business, but its future relies on the healthcare boom.

The health technology market is currently worth $157 billion, and as baby boomers age it’s demographically guaranteed that the industry’s growth will continue to accelerate. Conservative estimates place the industry’s compound annual growth rate at 5% until 2020, while other estimates go as high as 7.8%. This means that within five years, given stable economic conditions, the healthcare technology market will balloon to at least $200 billion.

Philips expects its equipment management services model will gain more clients as they realize the cost-saving benefits of working with an exclusive partner. In the past six months the company added three long-term contracts, including a 15-year $90 million agreement with Marin General Hospital, an 18-year $226 million contract with Mackenzie Health and a 15-year $500 million contract with Westchester Medical Center.

In its fourth-quarter earnings statement, Philips CEO said he expects revenues and earnings to grow modestly in 2016, mirroring 2015’s performance, given global economic conditions.

Management is committed to dividend stability and targets a payout ratio of 40% to 50% of continuing net income. During the past 20 years, including the leanest years of the recent global recession and downturn in Europe, the company kept or raised its ample dividend. Although management remains cautious about boosting its dividend, the company is more than capable of supporting its current dividend.

Yielding 3.5%, Royal Philips is a Buy up to $35.