By the numbers
Q2 revenue: $4.8 billion
7% increase year-over-year
Net income: $418 million
14% decrease year-over-year
Diluted earnings per share: $0.91
13% decrease year-over-year
Q2 trends
GE HealthCare raised its revenue and earnings expectations for 2023 as it plans to cut costs. The Chicago-based company, after spinning out from GE in January, reported a 7% increase in revenue and a 14% decline in net income in the second quarter, compared to the same period last year.
“We’re seeing continued solid market demand for our products and services. We’re allocating our R&D spend into high-growth areas to drive long-term innovation, while also driving margin improvement actions,” CEO Peter Arduini said Monday in a call with investors.
The company’s net income margin decreased to 8.7% from 11% the previous year, due to standalone interest costs, as well as inflation and investment.
Shifting delivery from air to sea and making fewer “spot buys” of components should help improve margins in the future, CFO Jay Saccaro said in the call. The company is also working to streamline some processes after its spinoff from GE, including exiting transitional service agreements, trimming IT services and reducing its real estate footprint. Saccaro expects the company to see the benefit of these changes starting in 2024.
Sales at GE HealthCare’s imaging segment, which is its largest, increased by 7% year-over-year. Saccaro said the increase was driven by supply chain improvements, stable demand and new products. The company’s fastest-growing segment was pharmaceutical diagnostics, which reported $568 million in sales, a 19% increase year-over-year.
New AI products
Arduini highlighted some of GE’s new products that use artificial intelligence during the earnings call. They include Sonic DL, a technology used to reduce the time needed for MRI scans, and Precision DL, a deep learning solution for enhanced image quality in PET and CT scans.
Asked by analysts what value these solutions bring to hospitals, Arduini said that by automating more steps, they can help customers facing labor constraints. The CEO also said the company is different from its competitors in that it allows customers to add new AI-driven features to existing equipment.
“If you have four of our MRs already and you want to add two new sites, upgrading those MRs with a capability that makes them state-of-the-art image quality … as well as increases their productivity by 30%, 40%, sometimes 50% throughput, it’s a huge deal,” Arduini said.
Raised forecast
GE HealthCare raised its forecasts for both revenue and earnings for 2023. It now expects organic revenue growth of 6% to 8% year-over-year, an increase from its previous range of 5% to 7%.
The company also expects adjusted earnings per share of $3.70 to $3.85, representing 9% to 14% growth year-over-year. It previously forecasted a range of $3.60 to $3.75 per share.