New IDN Partnerships And Advanced Imaging Will Unlock Future Markets

Key Takeaways

• Expansion through partnerships and growing market share is likely to drive revenue growth and enhance revenue stability.
  
• New technologies and acquisitions in diagnostics are positioned to significantly boost future revenue and earnings.
  
• Tariffs and regulatory uncertainties may hinder earnings and revenue growth, with competitive pressures impacting market share and cash flow constraints limiting financial flexibility.

Catalysts

Engages in the development, manufacture, and marketing of products, services, and complementary digital solutions used in the diagnosis, treatment, and monitoring of patients in the United States, Canada, and internationally.

• Expansion of market presence, driven by new partnerships with top IDNs and increased market share, is likely to boost future revenue growth.
  
• Ongoing mitigation strategies for tariff impacts, including supply chain optimization and local manufacturing shifts, are expected to enhance net margins and earnings.
  
• The pipeline of new high-impact products, like Radiopharmaceuticals, Total Body PET, and Photon Counting CT, is anticipated to drive future revenue growth and potentially improve margins.
  
• The focus on expanding recurring revenue, particularly in areas like digital solutions and advanced visualization, is expected to contribute positively to revenue stability and net margins.
  
• The launch of Flyrcado and recent acquisition activities are aimed at bolstering revenue streams in pharmaceutical diagnostics, which may contribute to overall revenue and earnings growth.

GE HealthCare Technologies Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming GE HealthCare Technologies's revenue will grow by 4.1% annually over the next 3 years.
• Analysts assume that profit margins will shrink from 11.0% today to 10.7% in 3 years time.
• Analysts expect earnings to reach $2.4 billion (and earnings per share of $5.41) by about May 2028, up from $2.2 billion today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $2.7 billion in earnings, and the most bearish expecting $2.0 billion.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 21.3x on those 2028 earnings, up from 14.1x today. This future PE is lower than the current PE for the US Medical Equipment industry at 30.3x.
• Analysts expect the number of shares outstanding to grow by 0.31% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.55%, as per the Simply Wall St company report.

GE HealthCare Technologies Future Earnings Per Share Growth

Risks

• The impact of tariffs, particularly between the U.S. and China, poses significant risk, with $0.85 impacting adjusted EPS, which could hinder margins and earnings.
  
• The uncertainty and potential regulatory changes in China, including antidumping investigations and rare earth export limitations, may impact revenue growth from this important market.
  
• The company faces challenges from competitor advancements in their product pipeline, which may put pressure on maintaining or increasing market share, affecting future revenues.
  
• Free cash flow has been reduced largely due to tariff impacts and inventory build, which may constrain operational liquidity and financial flexibility.
  
• While there is confidence in market demand, changes in the macroeconomic landscape, including global trade policies and foreign exchange volatility, can introduce significant earnings and margin risks.

Valuation

• The analysts have a consensus price target of $88.805 for GE HealthCare Technologies based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $110.0, and the most bearish reporting a price target of just $73.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $22.3 billion, earnings will come to $2.4 billion, and it would be trading on a PE ratio of 21.3x, assuming you use a discount rate of 7.5%.
• Given the current share price of $67.09, the analyst price target of $88.8 is 24.5% higher.
• 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.