GE Healthcare Technologies, Inc. (GEHC) 26Q3 Update

26Q3 gross profit increased 11.9% YOY on higher sales and a 170 bp gross margin expansion, as higher volume and prices and lower tariff costs were offset partially by inflation.  By segment, gross margin rose 270 bp in PCS, 190 bp in PDx and 120 bp in AIS.  GEHC’s SG&A expense ratio eased by 40 bp to 19.9% and its R&D expense ratio rose 10 bp to 5.8%.  Thus, operating income jumped 23.5% to $805 million as operating margin rose 190 bp to 14.6%.  Below the operating income line, higher interest expense and lower benefit-related income and other income were offset by a sharp drop in GEHC’s effective tax rate from 27.8% to 17.1%.  As a result, net income attributable to GEHC surged 38.1% to $614 million; GAAP diluted EPS jumped from $0.98 in 25Q3 to $1.36 and non-GAAP adjusted EPS rose from $1.07 to $1.34.  26Q3 free cash flow was $973 million vs. $651 million.

While GEHC is benefitting from recent product innovations, it has also stepped up its acquisition activity, spending $2.7 billion to acquire: (1) the remaining 50% stake (that it did not already own) in Nihon Medi-Physics, a radiopharmaceutical maker, from Sumitomo Chemical in March 2025; (2) icometrix, a provider of AI-powered brain imaging for neurological disorders, in November 2025; and (3) Intelerad, a leading medical imaging software and digital enterprise workflow solutions producer, in March 2026.  GEHC agreed last month to acquire SOFIE Biosciences, a leading, U.S.-based contract manufacturer of Positive Emission Tomography (PET) radiopharmaceuticals for $945 million in cash.

Based upon its stronger than expected 26Q3 results, management raised its adjusted 2026 EPS guidance range from $4.80-$5.00 to $4.95-$5.05.  My projection model now shows 2026 GAAP EPS of $4.81 and non-GAAP EPS of $5.00.   For 2027, I project GAAP diluted EPS of $5.01 and non-GAAP EPS of $5.50.

GEHC’s stock has underperformed both the market and peers for most of this year; but it has risen sharply over the past month, probably peaking yesterday, the day after the market’s post midterm election rally. Today, it pulled back by 2.4% to $83.79. YTD, the stock has delivered a price return of 2.0%, behind the S&P 500’s 7.4% advance and the S&P 500 Healthcare Index’s 19.4% gain.  Based upon its recent financial performance, I have raised my price target from $83 to $85, which equates to a forward valuation multiple of 17.0 times projected 2027 GAAP EPS of $5.01 and 15.5 times non-GAAP EPS of $5.50, both of which are below peer group averages.  The price target equates to a potential 6-12 month total return of 2.4%.  Consequently, I am maintaining my performance rating at “3” (Neutral).  I will consider raising my performance rating on a pullback or perhaps after the company issues its 2027 guidance in early February along with 26Q4 earnings.

November 5, 2026

Stephen P. Percoco
Lark Research
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© 2015-2026 by Stephen P. Percoco, Lark Research.   All rights reserved.

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