Shares in GE Healthcare(NASDAQ: GEHC) were down 8.4% for the week as of Friday at 10 a.m. ET, according to data provided by S&P Global Market Intelligence. The move comes after the company's disappointing first-quarter earnings report.
GE Healthcare earnings
Not only did the company miss Wall Street expectations for revenue ($4.65 billion compared to the analyst consensus of $4.8 billion), but there was also mixed margin performance in its segments.
The case for the stock rests on the idea that management can accelerate its growth now that it's a stand-alone company, not least through new product introductions (NPIs), mergers and acquisitions, improving its pricing and product platforming strategy, and developing technologies such as theranostics. The latter combines GE Healthcare's leadership in imaging with its pharmaceutical diagnostics and therapeutics so patients can be monitored and drugs can be precisely targeted to things like cancerous cells.
As the table demonstrates, ultrasound and patient care solutions reported sales and margin declines at a segment level, with management citing inflation and lower volumes in ultrasound and inflation and "timing of shipments" in patient care solutions.
Segment | Revenue | Change | EBIT Margin | Change (YOY) |
|---|---|---|---|---|
Imaging | $2.466 billion | Flat | 9.7% | Up 200 bp |
Ultrasound | $824 million | (4%) | 22.1% | Down 200 bp |
Patient care solutions | $747 million | (4%) | 10.9% | Down 310 bp |
Pharmaceutical diagnostics | $559 million | 8% | 29.7 | Up 190 bp |
Data source: GE Healthcare Technologies. 100 bp=1%. EBIT = earnings before interest and taxation. YOY = year over year.
What's next for GE Healthcare Technologies?
When adjusting for restructuring and the investment revaluation, GE Healthcare's adjusted EBIT margin rose to 14.7% from 14.1% in the same quarter last year. Still, investors are entitled to expect a little bit more, as the stock's case rests on an aggressive expansion of margins in the coming years. Moreover, references to inflation cause concern as they may run into the coming quarters.
Image source: Getty Images.
On a more positive note, management maintained its full-year guidance for an organic revenue increase of 4% and adjusted EBIT margin expansion to 15.6%-15.9% from 15.1% in 2023. Still, investors will want a better second-quarter earnings report before feeling entirely comfortable with the guidance.
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Lee Samaha has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
