Reasons to have GE HealthCare stock in your portfolio now

GE HealthCare Technologies, Inc. GEHC is well positioned for growth in the coming quarters thanks to its continued focus on innovation. Optimism driven by strong second-quarter fiscal 2024 results and acquisitions is expected to deepen further. However, geopolitical tensions and fierce competition are worrying.

Shares of this Zacks Rank #3 (Hold) company have gained 17.8% year-to-date versus an industry decline of 8.8%. The S&P 500 Composite Index rose 20% during this period.

A well-known provider of medical technology, pharmaceutical diagnostics and digital solutions with a market capitalization of $42.86 billion. The company forecasts growth of 6.3% over the next five years and expects to maintain good results in the future. It delivered an average earnings surprise of 5.89% for the trailing four quarters.

Image Source: Zacks Investment Research

Factors favoring the development of GEHC

Innovations supporting development: GE Healthcare’s commitment to innovation has enabled it to make continuous, significant improvements. In September, GEHC announced that it had received FDA approval for Flyrcado (flurpiridaz F 18), a breakthrough myocardial perfusion imaging agent using positron emission tomography (PET MPI) for the detection of coronary artery disease.

In the same month, the company introduced the Venue Spirit portable ultrasound system to meet the growing demand for point-of-care ultrasound in various healthcare settings. In September, it also received FDA approval to use MIM software to perform centiloid scaling for positron emission tomography (PET)-based amyloid imaging analysis.

The company’s Vscan Air SL wireless handheld ultrasound system with Caption AI technology received the CE mark in August. The company also received CE Mark for its use of ECG-free cardiac computed tomography (CT) on the Revolution Apex platform.

In July, the company announced the availability of the MIM Symphony high-dose (HDR) prostate device, which supports HDR brachytherapy and provides direct tumor visualization using magnetic resonance imaging (MRI) during live ultrasound procedures. In May, the company launched its CT radiotherapy solution, Revolution RT, which is expected to provide a better standard of care for cancer patients.

Acquisitions and partnerships: GE Healthcare has signed several partnerships that help it attract long-term customers for its products and services. GEHC is also focusing on acquisitions of companies that will help it grow.

In August, the company partnered with the University of California, San Diego School of Medicine to explore advanced MRI protocols and techniques for women’s pelvic diseases and conditions and develop comprehensive educational materials for clinicians.

In August, the company signed an agreement to acquire Intelligent Ultrasound Group PLC (Intelligent Ultrasound), a company that deals with clinical artificial intelligence software that will make ultrasound more intelligent and effective. In June, GEHC signed an agreement with Salud Digna to implement digital solutions to improve the efficiency of care protocols for physicians using computed tomography, magnetic resonance (MR) and ultrasound systems throughout Mexico.

In May, the company and Medis Medical Imaging announced a collaboration to advance precision care in the diagnosis and treatment of coronary artery disease.

Strong results for the second quarter:GE HealthCare ended fiscal second quarter 2024 with decent results, with earnings and revenue improving year over year. The company’s total order volume grew organically by 3% year over year. The company recorded a continued strong position in the pharmaceutical diagnostics segment, with revenues increasing by 12% compared to the previous year’s quarter.

GEHC’s net profit margin was 8.9%, up 20 basis points from the prior-year period due to productivity and pricing benefits.

Factors that could offset GEHC’s gains

Fierce competition: The presence of a large number of players has made the medical device market highly competitive. The company faces competition not only from similar global participants, but also from regional participants whose competition may vary by segment and product line.

In the industries it serves, its main global competitors are Siemens Healthineers, Philips Healthcare, Canon and United Imaging. In the pharmaceutical diagnostics segment, it competes primarily with Bayer, Bracco, Guerbet, Lantheus and Curium.

Geopolitical tensions: GE Healthcare’s business is exposed to risks arising from the ongoing war between Russia and Ukraine, which has led to the imposition of sanctions on its business activities. As of May 2023, the US government and the European Union have introduced expanded measures for certain medical equipment and spare parts for customers in Russia.

The implementation of these actions impacted GEHC’s ability to serve customers in Russia in 2023 and continued in the first quarter. In the first half of 2024, the company generated total revenues from Russia and Ukraine of USD 161 million.

Estimate the trend

GEHC has seen a steady trend in estimate revisions for fiscal 2025. Over the past 60 days, the Zacks Consensus Earnings Estimate has remained unchanged at $4.26 per share.

The Zacks Consensus Estimate is projecting fiscal 2024 third-quarter revenues of $4.86 billion, representing a 0.9% improvement from the prior-year quarter’s numbers.

Key choices

Some companies in the broader healthcare space have a better track record Universal Health Service UHS, Quest Diagnostics DGX i ABM industry ABC. Universal Health Service carries a Zacks Rank #1 (Strong Buy), while Quest Diagnostics and ABM Industries carry a Zacks Rank #2 (Buy). You can see complete list of today’s Zacks #1 ranked stocks here.

The estimated long-term growth rate for Universal Health Service is 19%. UHS earnings have topped estimates in each of the four consecutive quarters, with the average coming in at 14.58%.

Universal health care has gained 56.1% this year compared to the industry’s previous growth of 48.1%.

Quest Diagnostics’ estimated long-term growth rate is 6.20%. DGX earnings have topped estimates in each of the four consecutive quarters, with an average surprise of 3.31%.

Quest Diagnostics shares are up 13.9% this year compared with the industry’s gain of 17.9%.

ABM Industries’ earnings topped estimates in each of the four consecutive quarters, delivering an average surprise of 7.34%.

ABM shares are up 27.4% so far this year compared with the industry’s gain of 17%.

Want the latest recommendations from Zacks Investment Research? Today you can download the top 7 stocks for the next 30 days. Click to get this free report