GE HealthCare Technologies Inc. (GEHC) 2024 Q2 Earnings Call Summary

Optimistic Highlights

• Organic Revenue and Orders Growth: Achieved 1% organic revenue and 3% orders growth across all segments, with particular strength in the U.S. due to replacement cycles and increased imaging use.

• Margin Expansion Despite Headwinds: Expanded margins despite challenges in the China market, benefiting from lean processes and product improvements.

• Market Share Gains and Investments for Future Growth: Gaining market share in each segment and continuing to invest in products and services to accelerate future growth.

• Strong U.S. Market Performance: Secured over $800 million in multimodality equipment, software, and service contracts in the U.S., indicating a robust market.

• Strategic Acquisitions and Collaborations: Announced the acquisition of the AI division of Intelligent Ultrasound and a strategic collaboration with Amazon Web Services to develop AI tools.

Pessimistic Highlights

• Challenges in China Market: Faced negative sales growth in China in the first half, expecting continued decline in the second half due to delayed stimulus rollout.

• Lowered Full Year Organic Revenue Growth Guidance: Lowered total company full year organic revenue growth guidance due to the prolonged challenges in China.

Company Outlook

• Maintained EPS Guidance Despite Revenue Reduction: Maintaining EPS guidance for the year despite lowering revenue growth expectations due to challenges in China.

• Raised Adjusted EBIT Margin Guidance: Raising adjusted EBIT margin guidance based on productivity progress and reaffirming outlook for adjusted EPS and free cash flow.

Q & A Highlights

• Q: Can you discuss the pace of opening up new orders from the stimulus program in China? (Joanne Wuensch, from Citi)

  A: The stimulus program rollout in China is taking longer than estimated, impacting the timing of orders and sales. Expecting a positive impact on orders starting in late '24 but limited sales impact for the year. (Peter Arduini)

• Q: How are you able to maintain margins and EPS given the revenue reduction? (Larry Biegelsen, from Wells Fargo)

  A: Achieved through a focus on Kaizen, lean culture, cost initiatives, and execution against productivity initiatives, delivering incremental profit versus expectations. (Jay Saccaro)

• Q: Any high-level thoughts on 2025? Do you expect some catch-up from China next year? (Larry Biegelsen, from Wells Fargo)

  A: Confident in medium-term goals, with potential for more positive impact from China in 2025. Strategy focuses on core changes in the company and innovation pipeline. (Peter Arduini)

• Q: How is the U.S. market looking for Imaging and Ultrasound segments, and can this extend into 2025? (Anthony Petrone, from Mizuho Group)

  A: Strong orders growth in the U.S., with a healthy pipeline for growth. Expect solid customer demand, especially for recently launched products, to continue. (Jay Saccaro)

• Q: How does Alzheimer's disease play out from the PET/CT side with new blood-based tests coming in? (Anthony Petrone, from Mizuho Group)

  A: Expect PET scans to remain a hallmark for Alzheimer's diagnostics, with optimism about sales potential over the next few years due to CMS reimbursement proposal benefits. (Peter Arduini)