GE Healthcare Earnings: No Visibility on Timing of China Rebound, but Margin Improvement Intact

Key Morningstar Metrics for GE HealthCare Technologies

• Fair Value Estimate: $98.00
• Morningstar Rating: 3 stars
• Morningstar Economic Moat Rating: Wide
• Morningstar Uncertainty Rating: Medium

What We Thought of GE HealthCare Technologies’ Earnings

GE HealthCare GEHC reported third-quarter earnings aligned with our expectations, with declines in China offsetting growth in other regions. Although the timing of the rebound in China sales remains unclear, we are encouraged by the company’s improving operating profit margins. We maintain our fair value of $98 per share and view the stock as slightly undervalued at current market prices.

Revenue was $4.9 billion, or 1% year-on-year organic growth, and its book/bill ratio was a robust 1.04. The US region enjoyed strong sales and orders thanks to multiyear enterprise deals, especially for PET and CT systems (part of the imaging segment). Pharmaceutical diagnostics continued to perform well, posting 7% organic growth.

Excluding China, global sales growth was 5%. However, China’s rebound continues to be delayed. Year-to-date, China sales are down 17% from the prior year, and we expect the full-year impact will be about a 3% headwind to total revenue growth. Although stimulus funding has been announced, management was cautious about the timing of the rebound and expects limited benefits in the first half of 2025.

Adjusted EBIT margin in the quarter improved 90 basis points to 16.3% due to productivity and price improvements. The imaging and pharmaceutical diagnostics segments contributed most of the improvement, though this was partially offset by lower margins in advanced visualization solutions (formerly called “ultrasound”). We think steady margin improvement will continue over the next few years as management optimizes its operations as a stand-alone company.