Q3 2024 Summary
Published Feb 7, 2025, 7:58 PM UTC- GE HealthCare expects significant revenue growth from their new proprietary molecule, Flyrcado (flurpiridaz), projected to generate over $500 million annually once health system infrastructure is in place. Flyrcado is the first and only FDA-approved F-18 PET myocardial perfusion imaging tracer for patients with coronary artery disease and will be commercially available in early 2025.
- The company is experiencing strong margin expansion, raising their adjusted EBIT margin guidance to a range of 15.8% to 16%, reflecting an expansion of 70 to 90 basis points versus 2023 adjusted EBIT margin of 15.1%. They feel confident about their margin expansion plan for 2025 and beyond.
- GE HealthCare is well-positioned in the growing radiopharmaceuticals market, leveraging their full-spectrum capabilities including proprietary molecules, imaging equipment, and digital integration, which could drive substantial future growth. They are uniquely equipped to support customers across the entire spectrum, capitalizing on opportunities in areas like theranostics and benefiting from potential changes in reimbursement policies.
- GE HealthCare's revenue growth is significantly impacted by ongoing market headwinds in China, leading to only 1% organic revenue growth in Q3 2024, compared to 6% in Q3 2023 .
- The company expects limited market benefit from China stimulus through the first half of 2025, creating uncertainty in achieving mid-single-digit top-line growth and margin progression next year .
- GE HealthCare has refrained from providing specific guidance for 2025 due to volatility in the China market, indicating challenges in forecasting and potential risks to future performance .
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | +1% | Slight growth was driven by strength in USCAN, offset by a significant decline in China due to delayed stimulus programs and ongoing anti-corruption measures. Price improvements and cost productivity also contributed modestly. |
Imaging | -15% | Lower volume largely due to headwinds in China, which had been a strong contributor in the prior year. Challenging comps from Q2 2023 and soft global orders in certain product lines also reduced reported revenues. |
Ultrasound | +49% | Benefited from strong demand in cardiovascular and women’s health applications, along with new product launches and expanded global reach. Previous period investments and product development drove momentum in 2024. |
Pharmaceutical Diagnostics | +6% | Continued robust demand for contrast agents and radiopharmaceuticals, alongside pricing actions, supported moderate revenue growth. Recovery in elective procedures also contributed positively, despite some regional softness. |
United States & Canada | +8% | Higher orders and sustained demand in Imaging and Ultrasound segments drove growth. Multimodality contracts and stable hospital purchasing offset inflationary pressures. |
China Region | -22% | Impacted by delayed stimulus rollouts and an ongoing anti-corruption campaign, which led hospitals to postpone equipment purchases. This compares unfavorably to strong double-digit growth in the prior year. |
Operating Income (EBIT) | +10% | Improved cost productivity and pricing outweighed inflationary pressures. Investments in R&D and SG&A were partially offset by efficiency measures, contributing to operating margin expansion. |
Net Income | -87% | Affected by one-time costs and potentially non-operational charges overshadowing the gains from higher operating income. Lower non-operating benefit income compared to the prior period also contributed to the decline. |
EPS (Basic) | +26% | Despite the drop in net income, EPS rose due to operating margin improvements and a relatively stable share count. Lower interest expense and cost actions provided additional support. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Adjusted EPS | FY 2024 | $4.20 - $4.35 (7%-11%) | $4.25 - $4.35 (8%-11%) | raised |
Free Cash Flow | FY 2024 | ~$1.8B | ~$1.8B | no change |
| Metric | Period | Guidance | Actual | Performance |
|---|---|---|---|---|
Organic Revenue Growth | Q3 2024 | Approximately 1% year-over-year | Increased from 4,822To 4,863, which is about 0.85% growth year-over-year | Met |
Adjusted EBIT Margin | Q3 2024 | Expected to be relatively similar to Q2 2024 | 676Of Operating Income on 4,863Of Revenue ≈ 13.9% vs. ~12.6% in Q2 2024 | Surpassed |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Margin expansion remains a recurring focus with ongoing positive sentiment | Emphasized in Q2 with +60 bps EBIT margin YoY , in Q1 with +50 bps EBIT margin expansion , and in Q4 2023 with +60 bps standalone margin expansion. | Reported +150 bps gross margin expansion and +90 bps EBIT margin year-over-year, with confidence in further improvements through pricing and productivity. | Consistently spotlighted across all periods, showing incremental gains and sustained optimism. |
Continued China market weakness intensifies across periods | Discussed in Q2 (-15% sales first half) , Q1 (low-double-digit decline) , and Q4 2023 (expected H1 2024 decline). | Sales in China down 17% YTD, with stimulus delays pushing expected recovery into 2025; forecast a high-teens decline for the full year, around a $600 million impact on revenue. | Significant concern throughout the year, with recovery timeline shifting and deeper near-term impact. |
Consistent emphasis on backlog and orders as a growth driver | Q2 noted a $19B backlog and 1.06x book-to-bill , Q1 highlighted $18.7B backlog , and Q4 2023 showed $19.1B plus multiyear enterprise deals. | $19.6B backlog, +$1.2B YoY, with a 1.04x book-to-bill ratio, highlighting future revenue visibility. | Key strategic pillar maintaining strong order intake and supporting predictable growth. |
Radiopharmaceutical and theranostics pipeline emerges as a new high-potential segment | Q2 underscored CMS reimbursement benefits and new molecules , Q1 highlighted Flurpiridaz for cardiac PET , and Q4 2023 noted a $9B market growing to $40B. | Expanded theranostics investments, plus multiple radiopharmaceuticals (e.g., Flyrcado, DaTscan). Anticipate >$500M annual potential from new PET cardiac tracer. | Rapidly growing area with strong product pipeline and regulatory tailwinds fueling long-term prospects. |
Fulfillment delays in Patient Care Solutions no longer appear after Q1 2024 | Q1 cited fulfillment delays partially impacting performance, anticipated resolution by midyear. Q2 and Q4 2023: no mention [–]. | No current mention of fulfillment delays; lean capacity improvements noted, with greater fulfillment flexibility now in place. | Resolved issue, no longer a headwind after Q1. |
Competition from alternative Alzheimer’s diagnostics not mentioned after Q2 2024 | Q2 acknowledged blood-based tests as emerging competition but maintained confidence in PET imaging. No specific remarks in Q1 or Q4 2023. | No mention in Q3 2024. | No further updates, with last reference in Q2. |
Transition service agreements (TSAs) conclusion introduced in Q3 2024 for cost optimization | Q2 mentioned ongoing TSA exits but no final conclusion. Q1 stated 330 TSAs exited and more by year-end , Q4 2023 noted 280 TSAs completed. | Majority of TSAs exited, enabling new cost-saving measures with ~$4M annual IT savings from eliminating duplicate applications. | Newly finalized in Q3, enhancing focus on structural cost optimization. |
China market recovery timing carries significant long-term revenue implications | Q2 removed China stimulus impact from 2024 guidance , Q1 highlighted stimulus waiting and anticorruption effects , Q4 2023 expected H2 recovery. | Limited improvement expected until H1 2025, with delays in stimulus coordination slowing current demand. | Ongoing strategic factor, with continuously postponed recovery timeline. |
New radiopharmaceutical product Flyrcado expected to substantially impact future growth | No mention in Q2 or Q4 2023. In Q1, the precursor Flurpiridaz was discussed, but Flyrcado name not used. | Introduced Flyrcado (F-18 PET tracer) for coronary artery disease, seen as a game changer with potentially >$500M annual sales once infrastructure is in place. | New entrant in Q3, projected to be a major revenue driver in coming years. |
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China Sales Outlook
Q: How do you view China's sales trajectory?
A: Management noted that China's market recovery is taking longer than expected, with sales down 17% year-to-date and expected to be down high teens for the full year. They anticipate limited improvement through the first half of 2025, as stimulus funding coordination is taking longer. Despite this, they believe the weakness is temporary and expect China's market to remain attractive in the mid- to long term. -
Margin Expansion
Q: What's your outlook on future margin expansion?
A: Management is pleased with margin improvements, with EBIT margin up 70 basis points year-to-date and gross margin up 130 basis points. They have initiatives in place, including pricing, productivity, and cost savings, and see a long way to go on margins with good line of sight to further improvements. As transition service agreements conclude, they can pursue new initiatives to enhance margins. -
Flyrcado's Market Potential
Q: How significant is Flyrcado's sales potential?
A: Flyrcado is expected to contribute over $500 million once infrastructure is in place. The product offers better specificity and sensitivity for myocardial perfusion imaging and could be a game changer for patients. The main hurdle is the availability of PET systems in the right locations, which may take 6 to 12 months for customers to acquire and install. -
China's Impact on 2025 Outlook
Q: How will China's trends affect 2025 growth and margins?
A: Management acknowledges the uncertainty in China and is cautious about forecasting its recovery. They anticipate limited benefit from stimulus in the first half of 2025 and will be conservative in guidance. Despite this, they feel good about midterm guidance of mid-single-digit organic revenue growth and margin expansion. -
Pricing Strategy for 2025
Q: Can you sustain price increases next year?
A: Management has seen positive sales price contributions and feels good about pricing going forward. New products are key catalysts, and as they support customers with innovative solutions, price follows. -
P&L Considerations for Next Year
Q: Any factors impacting next year's P&L?
A: They expect R&D spending to grow more in line with sales next year. While incentive payouts are lower when sales are off, they are variable and move with sales; they don't expect a dramatic one-time step-up next year. -
Vizamyl Update
Q: How is Vizamyl performing?
A: Vizamyl sales in the U.S. nearly doubled quarter-over-quarter, showing robust growth. Management is encouraged by this progress and expects the CMS ruling to further accelerate growth. -
Flyrcado Driving System Sales
Q: Can Flyrcado boost PET system sales?
A: Flyrcado could drive demand for PET systems, as some customers may need to acquire PET systems to utilize the product. Management is excited about the potential for equipment sales alongside the agent. -
Q4 Guidance and Ramp
Q: What's expected for Q4 sales growth?
A: They expect Q4 revenue growth of approximately 2%, with the fourth quarter typically being the strongest. Confidence is based on continued strength in PDx and service business, robust U.S. market, and secured backlog. -
Steps in China Recovery
Q: Where are you in China's recovery steps?
A: Management indicated they are in the first step, with funds coordination but no release yet. They expect limited recovery through the first half of 2025 and are closely watching how the stimulus evolves.