GE HealthCare
(Nasdaq: GEHC)
shares were down today, even though second-quarter results topped the consensus forecast.
Shares of GEHC initially rose, but were down slightly to $80.36 apiece by afternoon trading today. MassDevice’s MedTech 100 Index — which includes stocks of the world’s largest medical device companies — was up slightly.
BTIG analysts said that with orders facing more challenging comps for the rest of the year at the same time that management raises guidance, investors might view GE HealthCare’s situation as more challenging.
The Chicago-based company posted profits of $418 million. That amounts to 91¢ per share on sales of $4.817 billion for the three months ended June 30, 2023.
GE HealthCare recorded a 13.8% bottom-line slide on sales growth of 7.4%.
Adjusted to exclude one-time items, earnings per share totaled 92¢. That landed 5¢ ahead of projections on Wall Street, where analysts expected sales of $4.79 billion.
What drove growth for GE HealthCare in Q2?
Imaging, patient care solutions and pharmaceutical diagnostics served as significant growth drivers for GE HealthCare. Imaging saw 7% year-over-year growth to revenues of $2.6 billion, marking the largest chunk of the company’s sales totals. The company cited drivers including supply chain fulfillment improvements, stable demand, new product introductions and price.
Patient care grew by 8%, and pharmaceutical diagnostics grew by 19%. Ultrasound’s revenues of $839 million marked 1% growth. GE HealthCare attributed that to new product introductions with artificial intelligence (AI) capabilities.
“We are pleased with organic orders growth of 6% for the second quarter reflecting ongoing strong global demand, and we continued to see revenue growth across our segments,” said GE HealthCare CEO Peter Arduini. “We’ve made good progress with our operating priorities in the first half of the year. As a result, we’re raising our top- and bottom-line guidance for the full year as we execute our precision care strategy.”
GE HealthCare updated its guidance, projecting revenues to grow between 6% and 8%. That compares to a previous range of 5% to 7%. The company also projects adjusted EPS to land between $3.70 and $3.85, marking a 10¢ rise on both ends from the previous guidance.
The analyst’s view
BTIG analysts Ryan Zimmerman, Sam Durno and Iseult McMahon wrote in a report that they view GE HealthCare shares as “fairly valued.” They maintain a “Neutral” rating despite some momentum for the company.
“Given the run in the shares, we think it’s prudent to remain Neutral until GEHC establishes a longer track record of independent execution.”
The analysts say that, as a standalone, GE HealthCare should benefit from a number of underlying growth drivers. Upsides in their estimates would come from lower competition in specific submarkets, more rapid integration and M&A uptake. Zimmerman, Durno and McMahon also said GE HealthCare’s upsides include limited disruption to manufacturing and supply chains and new regulatory clearances outside the U.S.
Downsides would come from increasing competition in highly competitive markets, manufacturing interruptions and supply chain and regulatory risks, among other things.
