GEHC reported 24Q4 revenues of $5.32 billion, up 2.2% YOY and slightly below my estimate of $5.39 billion. Revenues were flat in the Imaging and Patient Care Solutions (PCS) segments, but rose 4.1% in Advanced Visual Solutions (AVS) and 9.3% in Pharmaceutical Diagnostics (PDx). Excluding an approximate 200 bp decline from China, sales were up 4% Orders rose 6% YOY with a book-to-bill of 1.09X.
Despite the ongoing China headwinds, 24Q4 gross profit rose 5.5% and gross margin increased 140 bp to 42.8%. A 90 bp drop in GEHC’s SG&A expense ratio helped boost its operating income by 16.3%, with operating margin rising 180 bp to 15.1%. Lower interest charges, a doubling of pension-related non-operating benefit costs and a jump in other income also helped drive a 36.9% increase in pre-tax income. A lower tax rate pushed net income 77.4% higher. 24Q4 GAAP EPS increased from $0.88 in 23Q4 to $1.57 and non-GAAP adjusted EPS rose from $1.18 to $1.45. Both beat my estimates of $1.23 for GAAP EPS and $1.31 for non-GAAP EPS.
Management’s guidance for 2025 anticipates organic revenue growth of 2%-3%, adjusted EBIT margin of 16.7%-16.8%, adjusted EPS of $4.61-$4.75 and free cash flow of at least $1.75 billion. My projections are in line with that guidance. My forecast calls for revenue growth of 2.6%, adjusted EBIT margin of 16.8%, GAAP EPS of $4.55, non-GAAP EPS of $4.70 and free cash flow of $1.8 billion. For 2026, I anticipate that growth will continue with revenues rising 3.2%, GAAP EPS of $5.04, non-GAAP EPS of $5.10 and free cash flow of $2.1 billion. My projections assume that China headwinds will abate by mid-year and that the global economy will sidestep major dislocations.
Since my last report (11/2), GEHC’s stock has fallen 5.1%, worse than S&P 500’s 0.8% gain and the peer group’s 1.7% average decline. However, more than all that decline has occurred since the stock reached a new all-time intraday high of $94.80 on Feb. 13. Since then, it has fallen 13.0% to $82.46 today, but it has stabilized over the past eight trading sessions and remains above its most recent intraday low of $76.89 set on Dec. 19. As long as the stock remains above $76.89, there is a good chance, I believe, that it can recover later this year to that Feb. 13 high.
Accordingly, I am maintaining my price target of $94. The price target equates to a forward valuation multiple of 18.7 times projected 2026 GAAP EPS of $5.04 and non-GAAP EPS of $5.10. That is moderately above the stock’s current one-year forward multiples of 18.1 times 2025 GAAP EPS and non-GAAP EPS, but still below the peer group average of 19.7 times projected 2025 non-GAAP EPS. The price target represents a potential 12-month total return of 14.2%, including its low 0.2% dividend yield. Consequently, I am raising my performance rating from “3” (Neutral) to “2” (Outperform).
This is a summary of my recent update report on GE Healthcare Technologies (GEHC). To obtain a copy of the report, please reach out to me using the contact information provided below:
March 26, 2025 (Report published on March 25, 2025.)
Stephen P. Percoco
Lark Research
839 Dewitt Street
Linden, New Jersey 07036
(908) 975-0250
admin@larkresearch.com
© 2015-2025 by Stephen P. Percoco, Lark Research. All rights reserved.
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