Rising Tariffs And Regulation Will Squeeze Margins

Key Takeaways

• Escalating trade tensions and regulatory scrutiny are driving up costs and suppressing revenue growth, challenging profitability and supply chain stability.
  
• Market shifts toward value-based procurement and ongoing compliance issues threaten traditional revenue streams, highlighting urgent need for digital transformation and product innovation.
  
• Expansion of high-margin recurring revenue, successful acquisitions, innovation in healthcare, and cost-saving initiatives drive resilient profit growth and strong financial flexibility.

Catalysts

Provides products and solutions for operating rooms, intensive-care units, and sterilization departments in Sweden and internationally.

• Intensifying global trade tensions and sustained tariff increases between the EU, US, and China are poised to escalate operational costs and force Getinge to regionalize supply chains, directly compressing margins while eroding the company's ability to sustain EBITDA improvements.
  
• Strengthening regulatory scrutiny and growing pressure to curb healthcare spending across major developed markets threatens to dampen the willingness of hospitals to invest in capital-intensive medical equipment, resulting in stagnating or even declining top-line revenue growth.
  
• The company's pronounced reliance on advanced surgical and intensive care solutions magnifies its cyclicality risk, as prolonged macroeconomic uncertainty or fiscal austerity in health budgets may trigger widespread deferment of hospital capital expenditures, curbing both near
• and long-term growth in order intake and net sales.
  
• Ongoing quality and compliance risks-including historic FDA warning letters, regulatory restrictions on active selling and marketing of key products, and rising compliance costs-are likely to weigh on net margins as management must continually divert resources to satisfy increasingly complex oversight, while also limiting installed base expansion and market share.
  
• Industry consolidation and the accelerating shift toward value-based procurement and bundled payment models increase buyer bargaining power, exerting downward pressure on Getinge's product pricing and profit margins and potentially making its traditional hardware-centric revenue streams obsolete unless there is an accelerated and effective digital transformation.

Getinge Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more pessimistic perspective on Getinge compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
• The bearish analysts are assuming Getinge's revenue will grow by 3.2% annually over the next 3 years.
• The bearish analysts assume that profit margins will increase from 4.2% today to 9.5% in 3 years time.
• The bearish analysts expect earnings to reach SEK 3.7 billion (and earnings per share of SEK 13.63) by about July 2028, up from SEK 1.5 billion today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 14.4x on those 2028 earnings, down from 35.4x today. This future PE is lower than the current PE for the GB Medical Equipment industry at 45.5x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.02%, as per the Simply Wall St company report.

Getinge Future Earnings Per Share Growth

Risks

• Accelerating growth in high-margin and recurring revenue streams, now at 65% of total sales with additional momentum from key consumables and specialized products, provides resilience and upward momentum to both top-line revenue and net profit margins, supporting stronger long-term earnings.
  
• Robust performance in new acquisitions such as Paragonix, which are already margin-accretive and delivering above initial expectations, enhances group profitability and offers the potential for positive EPS surprises as these assets are integrated and grow.
  
• Sustained innovation and successful launches in infection control, digital solutions, and critical care (e.g., new ventilator options, expanded chemistry portfolios, and Healthmark/Quadralene synergies) position Getinge to capitalize on long-term secular trends in healthcare modernization and infection prevention, supporting organic revenue growth.
  
• Operational cost-saving initiatives and supply chain regionalization efforts, which are actively scaled up in response to tariffs and currency headwinds, have a proven track record in improving EBITA margins and are likely to strengthen net earnings as mitigation measures mature.
  
• Strong financial position, with leverage well below targets despite strategic acquisitions and ongoing investments, ensures ample flexibility to navigate macroeconomic headwinds and pursue further growth opportunities, increasing the probability of sustained improvement in net profit and shareholder value.

Valuation

• The assumed bearish price target for Getinge is SEK165.0, which represents the lowest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Getinge's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of SEK300.0, and the most bearish reporting a price target of just SEK165.0.
  
• In order for you to agree with the bearish analysts, you'd need to believe that by 2028, revenues will be SEK39.0 billion, earnings will come to SEK3.7 billion, and it would be trading on a PE ratio of 14.4x, assuming you use a discount rate of 6.0%.
  
• Given the current share price of SEK193.8, the bearish analyst price target of SEK165.0 is 17.5% lower. Despite analysts expecting the underlying buisness to improve, they seem to believe the market's expectations are too high.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.