GE Healthcare Earnings Call: Achievements and Challenges

Ge Healthcare Technologies Inc. ((GEHC)) has held its Q4 earnings call. Read on for the main highlights of the call.

During the recent earnings call, GE Healthcare Technologies Inc. reflected a mixed sentiment. The company celebrated significant achievements in margin expansion and order growth, along with strategic partnerships and a record backlog. However, challenges in the China market and a decline in free cash flow cast a shadow over the overall performance. Despite these hurdles, guidance for 2025 shows cautious optimism with continued investments in innovation and strategic alliances.

Strong Margin Expansion

The company reported a notable adjusted EBIT margin expansion to 18.7% in the fourth quarter, marking an increase of 260 basis points year-over-year. This improvement was primarily attributed to enhanced productivity and volume increases, highlighting effective operational efficiencies.

Robust Order Growth

GE Healthcare witnessed a robust growth in orders, which climbed by 6% year-over-year. The book-to-bill ratio reached 1.09, marking the highest level since the company’s spin-off, indicating strong demand for its offerings.

Record Backlog

Exiting the fourth quarter, the company boasted a record backlog of $19.8 billion, which represents an increase of $700 million compared to the previous year. This backlog underscores the sustained demand and future revenue prospects for the company.

New Product Launches

In 2024, GE Healthcare introduced 40 innovations, which significantly contributed to the year’s revenue, with new products accounting for approximately 50%. A notable upcoming product launch is the Flyrcado radiopharmaceutical, expected to drive further revenue growth.

Significant Partnerships

The announcement of a Care Alliance with Sutter Health, valued at $1 billion over seven years, highlighted GE Healthcare’s strategic focus on partnerships. This deal contributes to a total of over $5 billion in large deals since the company’s spin-off, showcasing the importance of strategic alliances in its growth strategy.

Challenges in China

The company faced headwinds in the China market, which negatively impacted global sales growth by 200 basis points. For 2025, GE Healthcare anticipates a low single-digit revenue decline in this market, reflecting ongoing challenges.

Free Cash Flow Decline

A decline in free cash flow was reported, with the fourth quarter figures at $811 million, down by $145 million year-over-year. This was primarily due to inventory builds, indicating possible supply chain or demand forecasting issues.

Patient Care Solutions Margin Decline

The EBIT margin for the Patient Care Solutions segment declined by 50 basis points year-over-year. The decrease was attributed to inflationary pressures and a challenging portfolio mix, pointing to areas needing strategic adjustments.

Forward-Looking Guidance

Looking ahead, GE Healthcare’s guidance for 2025 projects revenue growth of 2% to 3%, despite anticipating a low single-digit decline in the China market. Excluding China, sales are expected to grow in the mid-single digits. The company plans to counteract foreign exchange headwinds and new U.S. tariffs on Chinese products. GE Healthcare aims to expand its adjusted EBIT margin by 40 to 50 basis points and expects adjusted EPS growth between 3% and 6%. The company also projects a free cash flow of at least $1.75 billion, emphasizing ongoing investments in R&D and strategic initiatives to fuel long-term growth.

In conclusion, GE Healthcare Technologies Inc.’s earnings call presented a balanced view of achievements and challenges. While the company demonstrated strong margin improvements and strategic growth through partnerships and innovations, difficulties in the China market and cash flow decline posed concerns. The forward-looking guidance reflects a cautious yet optimistic stance, with continued focus on innovation and strategic investments for sustained growth.