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GE Healthcare Shows Strong Performance and Promising Outlook
GE Healthcare stock is experiencing a positive trajectory in 2025, reflected by a nearly 9% surge on Thursday following a solid fourth-quarter financial report and cautious predictions for the upcoming year. Although the stock faced challenges in 2024, the latest figures provided a boost to shares that had recently reached their lowest levels in mid-December.
In the fourth quarter, which ended on December 31, revenue increased by 2% year-over-year to $5.32 billion, slightly below the $5.33 billion anticipated by analysts, as per LSEG data. However, adjusted earnings per share (EPS) rose significantly, reaching $1.45, surpassing the $1.26 forecast. This marks a robust 22.9% increase in adjusted EPS compared to the previous year.
The stock’s Thursday performance positioned GE Healthcare for a potential record closing, with the possibility of surpassing $90 per share for the first time since mid-October. After hitting an all-time high in late September, the stock had faced significant declines in the latter months of 2024, largely attributed to rising bond yields that increase borrowing costs for healthcare providers investing in high-cost equipment like MRI machines. During the downturn, additional shares were acquired at around $82 apiece in late November.
Stock Sentiment and Future Projections
With a more favorable sentiment surrounding the stock and the healthcare sector at the beginning of 2025, GE Healthcare shares opened Thursday with a nearly 10% gain, suggesting further upside potential following the earnings report. As a result, the stock receives a hold-equivalent rating, with the price target increased to $100 per share.
Why Invest in GE Healthcare?
GE Healthcare is recognized as a leader in medical imaging, diagnostics, and digital health solutions. The company’s independence following its split from General Electric in 2023 has allowed for increased investment in research and development, fostering innovation particularly in artificial intelligence. The introduction of higher-priced products, along with strategic enhancements post-split, indicates a valuable margin expansion opportunity. Additionally, the launch of new treatments for Alzheimer’s disease and the diagnostic agent Flyrcado are expected to support long-term growth.
Competitive Landscape
Key competitors in the market include Philips and Siemens. GE Healthcare’s most recent stock purchase occurred on November 22, 2024, following an initial investment on May 17, 2023.
Impressive Fourth-Quarter Results
The fourth-quarter report highlighted several positive aspects, including a substantial beat on adjusted EPS and achieving a record adjusted operating margin of 18.7%, exceeding estimates of 17.2%. Management expressed confidence in their ability to further enhance operating margins, aiming for levels above 20% in the future.
Order growth showed a significant increase, accelerating to 6% in the fourth quarter—the best performance since the second quarter of 2023—with a record backlog of $19.8 billion. The book-to-bill ratio of 1.09, indicating more orders than fulfilled during the period, was a strong upward signal, particularly when compared to the previous quarter’s ratio of 1.04. Additionally, GE Healthcare’s portfolio of artificial intelligence-enabled products gained traction, with FDA approvals increasing from 58 to 85 over the past year, establishing GE Healthcare as a prominent player in AI applications in healthcare.
Guidance for 2025
The guidance for 2025 was arguably the highlight of GE Healthcare’s report, with executives projecting adjusted EPS between $4.61 and $4.75, exceeding the consensus estimate. The company anticipates profitability improvements with adjusted operating margins estimated at 16.7% to 16.8%, up from 16.3% in 2024. This forecast accounts for an expected impact from tariffs, suggesting a cautious but optimistic approach.
Predicted organic revenue growth is set at 2% to 3%, considering a hit from foreign exchange challenges. The guidance implies a 3% to 6% growth in EPS year-over-year, with careful consideration of potential headwinds related to sluggish demand in China and tariffs on imports from the region.
Management’s Insights
During a recent conference call, management appeared to be adequately managing market expectations for recoveries in their China business, noting a slight improvement in fourth-quarter order growth. However, they anticipate negative sales in China for the first half of 2025, with expectations for sequential improvement in the latter half of the year.
Furthermore, GE Healthcare is poised for multiple product launches in 2025, with Flyrcado being a notable upcoming release. The diagnostic agent is expected to improve detection of coronary artery disease and is projected to begin generating revenue in April, with an estimated $30 million in sales anticipated for the year. Looking ahead, Flyrcado is expected to represent a $500 million annual sales opportunity by 2028, although some analysts speculate that the potential market could be significantly larger.
Overall, GE Healthcare’s fourth-quarter results and guidance provide a promising outlook for investors, marking a favorable turn for a company with significant growth potential.
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