GEHC reported 25Q3 revenues of $5.14 billion, up 5.7% YOY and 2.9% above my estimate. Revenues rose 20.0% in Pharmaceutical Diagnostics (PDx), 7.0% in Advanced Visual Solutions, 5.4% in Imaging, but fell 6.2% in Patient Care Solutions (PCS). Sales rose 5.0% in the U.S., 9.9% in Europe and 7.7% in the rest of the world, offsetting a 3.0% decline in China. Organic revenues rose 3.5%. Organic orders increased 6%, with a book-to-bill of 1.06 times.
25Q3 gross profit declined 1.9%, as gross margin fell 300 bp to 38.7%. The decline was due cost inflation, including the cost of tariffs, partially offset by higher prices. GEHC’s SG&A expense ratio fell 100 bp to 20.3%, as higher investments in commercial teams and an acquisition of a partner’s 50% JV interest were more than offset by lower costs associated with the spin-off from GE. GEHC’s R&D expense ratio fell 80 bp to 5.7%, due to project closeouts. With the drop in gross margin exceeding those in SG&A and R&D, operating income fell 3.7% to $652 million and operating margin was down 120 bp to 12.7%, Other items were slightly less negative, but the company’s effective tax rate rose from 25.5% to 27.8%. As a result, net income fell 5.7% to $463.0 million. 25Q3 GAAP diluted EPS dropped from $1.02 in 24Q3 to $0.97 and non-GAAP adjusted EPS from $1.14 to $1.07. My estimates were $1.03 for GAAP EPS and $1.06 for non-GAAP EPS. 25Q3 free cash flow was $483 million, below year’s $651 million.
GEHC is entering a new wave of innovation as a result of its recent R&D investments and acquisitions. Along with its focus on Lean, it expects to boost top and bottom line growth, helped by products such as contrast media and nuclear medicine. Its offerings in diagnostic imaging equipment, radiopharmaceuticals and AI, cloud and software services help customers deliver higher quality with greater efficiency, enhancing its competitive advantages.
Management reaffirmed its 2025 guidance, raising the low end of its adjusted EPS range from $4.43-$4.63 to $4.51-$4.63. Based upon 25Q3 results, I now expect 2025 GAAP EPS of $4.59 (down from $4.62) and non-GAAP EPS of $4.50 (up from $4.45). For 2026, I project GAAP EPS of $4.22 (vs. $4.18), non-GAAP EPS of $4.70 (vs. $4.45).
Since my last report, GEHC’s stock has delivered a total return of 14.9%, twice the S&P 500’s 7.4%. However, it is down 4.6% over the past three trading sessions, after rallying 23.1% from a low of $70.04 on November 17 to an intraday peak of $86.19 on December 11. The stock therefore appears to be heading for a correction. After such a sharp run-up and until the company issues its 2026 guidance in January, I am maintaining my price target of $83, which equates to a forward valuation multiple of 19.6 times projected 2026 GAAP EPS of $4.22 and 17.6 times non-GAAP EPS of $4.70, both of which are roughly in line with peer group averages. The price target equates to a potential 12-month return of 1.8%. Consequently, I am lowering my performance rating from “1” (Buy) to “3” (Neutral).
This is a summary of my recent update report on GE Healthcare Technologies Inc. (GEHC). To obtain a copy of the report, please reach out to me using the contact information provided below.
December 17, 2025 (Report published on December 16, 2025.)
Stephen P. Percoco
Lark Research
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