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    GE Healthcare Technologies Inc (GEHC)

    Q1 2024 Summary

    Published Jan 10, 2025, 5:10 PM UTC
    Initial Price$76.58January 1, 2024
    Final Price$89.53April 1, 2024
    Price Change$12.95
    % Change+16.91%

    What went well

    • GE Healthcare is launching several new products, particularly in Ultrasound, which are expected to accelerate revenue growth from Q2 onwards.
    • The company has a healthy backlog and positive book-to-bill ratio, providing confidence in achieving mid-single-digit revenue growth targets over the next couple of years.
    • Resolution of fulfillment challenges in the Patient Care Solutions segment by midyear, along with potential upside from China's stimulus package, are expected to contribute to accelerated growth in the second half of the year.

    What went wrong

    • Uncertainty in the China market due to anti-corruption measures and delays in stimulus implementation may negatively impact GE HealthCare's revenue growth. While the company expects the second half of the year to be positive, the timing of the stimulus benefits remains unclear and could potentially impact 2025 instead of 2024. ,
    • Low order growth over recent quarters may signal weaker future revenue growth than expected. Analysts noted that GE HealthCare has seen low single-digit order growth over the last three quarters, which may not be sufficient to drive the anticipated mid-single-digit revenue growth in 2025. ,
    • Fulfillment delays in the Patient Care Solutions (PCS) segment and challenges in the Ultrasound business could impact revenue growth and margins. The company experienced fulfillment delays in PCS and a 4% year-over-year decline in Ultrasound revenue in Q1 2024. Although management expects improvements, the timing and extent of recovery remain uncertain. ,

    Q&A Summary

    1. China Sales and Stimulus Impact
      Q: How will China's stimulus affect sales this year?
      A: Management expects China's new stimulus, which includes specific cash grants for equipment purchases, to positively impact sales in the second half of the year. However, the extent depends on when the stimulus details are clarified. They anticipate that clarity in Q2 could lead to an uptick in orders, especially benefiting ultrasound sooner. The stimulus could provide upside to prior guidance, but they maintain their current outlook, expecting China sales to turn positive in H2 after a negative first half. , , ,

    2. Order Growth and Backlog
      Q: How confident are you in accelerating order growth?
      A: Management is confident in mid-single-digit order growth picking up in the second half, supported by a $19 billion backlog—nearly $1 billion higher than pre-COVID levels. Positive book-to-bill ratios and new product introductions are expected to drive growth, despite low single-digit order growth over the last three quarters. They see improving market conditions and expect orders to translate into revenue growth. ,

    3. Confidence in Guidance and Pricing
      Q: Are you confident in meeting full-year guidance?
      A: Management remains confident in achieving their full-year guidance, citing easing comps, a growing orders funnel, and positive pricing trends. They are observing 1–2% price increases contributing to sales, with pricing discipline not significantly impacting customer decisions. ,

    4. Margin Outlook and Gross Margin Improvement
      Q: What is the outlook for gross margin improvement?
      A: Gross margin expanded by 120 basis points, driven by pricing and productivity. New product introductions are expected to further support gross margin expansion. Management emphasizes ongoing lean initiatives and variable cost productivity to offset inflation and drive margins.

    5. Ultrasound Growth Outlook
      Q: How will ultrasound growth evolve this year?
      A: Management expects ultrasound revenue growth to ramp throughout the year, with new product introductions and improving market dynamics driving demand. Challenges in China affected Q1, but they anticipate a pickup as the year progresses, especially with the potential benefits from China's stimulus. ,

    6. Imaging Business Outlook
      Q: What is the outlook for the imaging business?
      A: The imaging backlog is solid, with growth supported by price increases and new platform capabilities that bring better margins. Sales are expected to pick up in Q2, with the majority of growth in Q3 and Q4. A larger uptick in imaging orders is anticipated in the second half, partly due to the China stimulus.

    7. Alzheimer's Diagnostic Uptake
      Q: What is expected for Alzheimer's diagnostic products?
      A: Management saw slight upticks for Vizamyl but doesn't expect major material moves in 2024. They anticipate more significant uptake starting in the second half of the year, with larger impacts in 2025 and beyond as new therapies and reimbursement evolve.

    8. M&A Strategy and Business Development
      Q: Will you focus on larger acquisitions or small deals?
      A: The company plans to continue pursuing tuck-in deals that strategically fit into core businesses, like the recent MIM Software acquisition. While they remain open to larger opportunities if they align well, the primary focus is on smaller acquisitions and partnerships that enhance their portfolio. Robotics, especially in surgery, is not a top priority.

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