GE HealthCare (GEHC)

Healthcare technology company GE HealthCare Technologies (NASDAQ:GEHC) announced better-than-expected revenue in Q3 CY2025, with sales up 5.8% year on year to $5.14 billion. Its non-GAAP profit of $1.07 per share was 2.2% above analysts’ consensus estimates.

Company Overview

Spun off from industrial giant General Electric in 2023 after over a century as its healthcare division, GE HealthCare (NASDAQ:GEHC) provides medical imaging equipment, patient monitoring systems, diagnostic pharmaceuticals, and AI-enabled healthcare solutions to hospitals and clinics worldwide.

The medical devices and supplies industry, particularly those specializing in imaging and diagnostics, operates with a comparatively stable yet capital-intensive business model. Companies in this space benefit from consistent demand driven by the essential nature of diagnostic tools in patient care, as well as recurring revenue streams from consumables, service contracts, and equipment maintenance. However, the industry faces challenges such as significant upfront development costs, stringent regulatory requirements, and pricing pressures from hospitals and healthcare systems, which are increasingly focused on cost containment. Looking ahead, the industry should enjoy tailwinds from advancements in technology, including the integration of artificial intelligence to enhance diagnostic accuracy and workflow efficiency, as well as rising demand for imaging solutions driven by aging populations. On the other hand, headwinds could arise from a rethinking of healthcare costs potentially resulting in reimbursement cuts and slower capital equipment purchasing. Additionally, cybersecurity concerns surrounding connected medical devices could introduce new risks and complexities for manufacturers.

GE HealthCare's primary competitors include Siemens Healthineers (ETR:SHL), Philips Healthcare (NYSE:PHG), Canon Medical Systems (TYO:7751), and Mindray (SHE:300760). In the pharmaceutical diagnostics segment, the company competes with Bayer (ETR:BAYN), Bracco, Guerbet (EPA:GBT), and Curium.

Larger companies benefit from economies of scale, where fixed costs like infrastructure, technology, and administration are spread over a higher volume of goods or services, reducing the cost per unit. Scale can also lead to bargaining power with suppliers, greater brand recognition, and more investment firepower. A virtuous cycle can ensue if a scaled company plays its cards right.

With $20.25 billion in revenue over the past 12 months, GE HealthCare has decent scale. This is important as it gives the company more leverage in a heavily regulated, competitive environment that is complex and resource-intensive.

A company’s long-term sales performance can indicate its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Unfortunately, GE HealthCare’s 3.5% annualized revenue growth over the last four years was tepid. This was below our standard for the healthcare sector and is a tough starting point for our analysis.

Long-term growth is the most important, but within healthcare, a stretched historical view may miss new innovations or demand cycles. GE HealthCare’s recent performance shows its demand has slowed as its annualized revenue growth of 2.5% over the last two years was below its four-year trend.

We can better understand the company’s sales dynamics by analyzing its organic revenue, which strips out one-time events like acquisitions and currency fluctuations that don’t accurately reflect its fundamentals. Over the last two years, GE HealthCare’s organic revenue averaged 2.3% year-on-year growth. Because this number aligns with its two-year revenue growth, we can see the company’s core operations (not acquisitions and divestitures) drove most of its results.

This quarter, GE HealthCare reported year-on-year revenue growth of 5.8%, and its $5.14 billion of revenue exceeded Wall Street’s estimates by 1.5%.

Looking ahead, sell-side analysts expect revenue to grow 4.4% over the next 12 months. While this projection indicates its newer products and services will fuel better top-line performance, it is still below average for the sector.

GE HealthCare has done a decent job managing its cost base over the last five years. The company has produced an average operating margin of 13.7%, higher than the broader healthcare sector.

Looking at the trend in its profitability, GE HealthCare’s operating margin decreased by 3 percentage points over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.

In Q3, GE HealthCare generated an operating margin profit margin of 12.7%, down 1.2 percentage points year on year. This reduction is quite minuscule and indicates the company’s overall cost structure has been relatively stable.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Sadly for GE HealthCare, its EPS declined by 3.8% annually over the last four years while its revenue grew by 3.5%. This tells us the company became less profitable on a per-share basis as it expanded.

In Q3, GE HealthCare reported adjusted EPS of $1.07, down from $1.14 in the same quarter last year. Despite falling year on year, this print beat analysts’ estimates by 2.2%. Over the next 12 months, Wall Street expects GE HealthCare’s full-year EPS of $4.59 to grow 4.4%.

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

GE HealthCare has shown decent cash profitability, giving it some flexibility to reinvest or return capital to investors. The company’s free cash flow margin averaged 7.8% over the last five years, slightly better than the broader healthcare sector.

Taking a step back, we can see that GE HealthCare’s margin dropped by 7.2 percentage points during that time. If its declines continue, it could signal increasing investment needs and capital intensity.

GE HealthCare’s free cash flow clocked in at $483 million in Q3, equivalent to a 9.4% margin. The company’s cash profitability regressed as it was 4 percentage points lower than in the same quarter last year, but it’s still above its five-year average. We wouldn’t put too much weight on this quarter’s decline because investment needs can be seasonal, causing short-term swings. Long-term trends are more important.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

Although GE HealthCare hasn’t been the highest-quality company lately because of its poor bottom-line (EPS) performance, it historically found a few growth initiatives that worked out well. Its five-year average ROIC was 14.8%, impressive for a healthcare business.

GE HealthCare reported $4.03 billion of cash and $10.28 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $3.52 billion of EBITDA over the last 12 months, we view GE HealthCare’s 1.8× net-debt-to-EBITDA ratio as safe. We also see its $166 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

It was good to see GE HealthCare narrowly top analysts’ organic revenue expectations this quarter. We were also happy its revenue narrowly outperformed Wall Street’s estimates. Overall, this print had some key positives. The stock remained flat at $79 immediately following the results.

Updated: December 4, 2025 at 10:37 PM EST

When considering an investment in GE HealthCare, investors should account for its valuation and business qualities as well as what’s happened in the latest quarter.

GE HealthCare’s business quality ultimately falls short of our standards. First off, its revenue growth was uninspiring over the last four years. And while its solid ROIC suggests it has grown profitably in the past, the downside is its declining EPS over the last four years makes it a less attractive asset to the public markets. On top of that, its cash profitability fell over the last five years.

GE HealthCare’s P/E ratio based on the next 12 months is 17.4x. This valuation multiple is fair, but we don’t have much faith in the company. We're pretty confident there are superior stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $88.11 on the company (compared to the current share price of $82.49).