GE Leaders: Healthcare Executing Well, Feels Sustainable
By Jof Enriquez,
Follow me on Twitter @jofenriq
GE Healthcare posted a strong second quarter, and the conglomerate's top executives believe that favorable markets and real opportunities for growth will keep the unit’s performance sustainable.
Jeffrey R. Immelt, GE Chairman and CEO, told analysts in an earnings call that growth for the Healthcare business "feels sustainable, with diverse growth and market momentum. Healthcare is better, not just in the U.S., but globally," while highlighting the "awesome" growth in the Chinese market.
GE reported that orders in China were up 9 percent on an organic basis, and the company just opened the first KUBio biopharmaceutical facility for JHL Biotech in China, and broke ground on a second facility with Pfizer, according to a press release.
GE Healthcare grew 15 percent in the first quarter, and the momentum has carried over in the second quarter as the Healthcare team continues to execute well, delivering a strong second quarter and first half, said GE CFO and SVP Jeffrey S. Bornstein.
He said revenues in the second quarter rose 6 percent to $4.5 billion. Healthcare system orders grew 3 percent, and revenues increased 4 percent organically, driven by imaging and ultrasound, up 8 percent and 7 percent, respectively, according to Bornstein. Imaging orders expanded 2 percent organically, with both CT and MRI up double digits, partially offset by X-ray and mammo weakness. Life Sciences posted robust growth, with orders up 12 percent organically, and revenues rose 11 percent. Bioprocess surged 26 percent and core imaging grew 6 percent. Operating profit in the quarter increased 11 percent to $782 million.
By region, organic orders were higher by 2 percent in the United States, 9 percent in China, 11 percent in Europe, and 17 percent in ASEAN (Association of Southeast Asian Nations), but down 9 percent in Latin America, said Bornstein.
"The Healthcare team is driving technology competitiveness, transforming their portfolio digitally, and reducing the product and service costs. The team has delivered roughly half the cost-out target of $350 million for the year. The team is on track to deliver or beat the 50 basis points of margin improvement that we set out as a goal for the year," Bornstein told analysts.
GE had instituted cost-cutting measures and offered less-expensive imaging products – particularly ultrasound machines – to help the healthcare unit sustain its growth in the last several quarters. The company also launched in December its cloud-based radiology imaging service, Health Cloud, based on its Predix cloud technology. GE Health Cloud will ultimately connect more than 2 million imaging machines worldwide, including 500,000 GE Healthcare devices, and the company considers the platform another revenue generator.
The conglomerate's total revenues for the second quarter amounted to $33.5B, with net earnings of $2.7 billion.
"The diversity and scale of our portfolio enabled the company to perform well despite a volatile and slow growth economy. We delivered $0.51 of earnings per share with strong execution in Power, Aviation and Healthcare that offset challenging environments in Oil & Gas and Transportation. We expect strong organic growth in the second half of the year and reaffirm our 2016 operating framework," stated Immelt.