Shares in leading healthcare company GE HealthCare Technologies (GEHC -0.25%) soared by 24.4% in February, according to data provided by S&P Global Market Intelligence. There's little doubt over the catalyst for the move; it comes from an excellent earnings report released in the first week of the month.
GE HealthCare's growth potential
The investment case for GE HealthCare is based on the idea that, now that it's a stand-alone company, management is free to realize its full potential. That potential lies in optimizing its pricing and product portfolio, researching and developing new products, building out its artificial intelligence (AI) backed solutions, selective mergers and acquisitions activity, and growing in exciting growth markets where it has a natural edge.
One example of the latter comes from the growing theranostics market. In this medical technique, one radiopharmaceutical drug is used to diagnose and monitor an affected area (such as with cancer cells). Meanwhile, another drug targets and treats the area precisely, producing better patient outcomes.
GE HealthCare manufactures imaging equipment integral to the process and the pharmaceutical diagnostics used in it too. It's an exciting growth area in oncology (cancer treatment) and neurological diseases such as Alzheimer's or Parkinson's.
While this happens, management plans to grow revenue by a mid-single-digit annual rate, with adjusted earnings before interest and taxation (EBIT) growing from 15.1% in 2023 to "high teens to 20%" over the next three to five years.
Image source: Getty Images.
GE HealthCare makes progress
The excellent news is the company has made progress on all these aims:
- Pricing increased 3% in 2023, and management expects a further 1% to 2% in 2024.
- The company released 40 new product introductions (NPI) in 2023.
- CEO Peter Arduini said on the earnings call, "We topped the FDA's list of AI-enabled device authorizations with 58."
- The company has existing diagnostic agents for use in oncology, neurology, and cardiology, and Arduini promised, "In the next three years, we plan to significantly increase our current theranostics franchise through a combination of organic and inorganic expansions"
- Organic revenue increased 8% in 2023, with comparable adjusted EBIT margin rising from 14.5% in 2022 to 15.1% in 2023.
- Management's guidance calls for 4% organic revenue growth in 2024, with adjusted EBIT margin growing to 15.6% to 15.9%.
Looking forward
It's an impressive checklist of achievements and implies that GE HealthCare has a long pathway of growth ahead of it, with revenue growth and margin expansion in tow.
