GE Healthcare Optimistic On China, Jittery Over Obamacare
By Jof Enriquez,
Follow me on Twitter @jofenriq
GE Healthcare had a strong 2016 fourth quarter performance led by over 19 percent growth in China. For 2017, the company expects momentum to carry over for markets in China, Africa, and the Asia Pacific, while Europe will be stable. The United States market, however, is expected to slow down due to uncertainty over the effects of a looming repeal of the Affordable Care Act.
Orders in the fourth quarter grew 3 percent to $5.4 billion, steered by emerging markets, which grew 10 percent. China led all markets with more than 19 percent growth, followed by Latin America at 16 percent. Europe posted a modest 6 percent growth, but the U.S. market contracted by 1 percent during the fourth quarter of 2016.
"In 2017, we expect the same focus on cost and product competitiveness with similar results. We will launch 25 new products and are targeting a point of share in 2017. We expect China, Africa and Asia Pacific to continue their strong growth. Europe is expected to be roughly stable, while the U.S. maybe a bit slower due to the uncertainty around the repeal or replace of the Affordable Care Act," reported Jeff Bornstein, GE SVP and CFO, in an earnings call, according to Seeking Alpha.
Sales were boosted by ultrasound, up 6 percent, and imaging, which grew 2 percent. In terms of business lines, healthcare systems orders grew organically by 3 percent, with imaging up 5 percent on strength in CT, MRI, and ultrasound. Life sciences orders rose 6 percent, with bioprocess higher by 7 percent, and core imaging up 6 percent.
For the whole year 2016, total healthcare orders grew 3 percent reported and increased 5 percent organically, while healthcare revenue expanded by 4 percent reported and 5 percent organically. Operating profit of more than $1 billion increased 10 percent in the quarter, said Bornstein.
GE Healthcare's strong financial performance may continue in 2017, but is likely to continue being driven by non-U.S. markets. The U.S. posted 1 percent fewer orders in the fourth quarter, a trend that is expected to persist due to an impending repeal of the Affordable Care Act. GE has good reason to worry, as healthcare is the company's third-largest business by sales, according to Market Watch.
A repeal of the whole or portions of ACA could mean hospital clients ordering fewer medical equipment, supplies, and services due to lower healthcare demand. Around 18 million Americans stand to lose insurance coverage during the first year of an ACA repeal, if proposed legislation gets approved, according to a report from the Congressional Budget Office.
"The Affordable Care Act is getting the most, I would say both attention and the media and by our customers. I think you could see some caution around the Affordable Care Act as you go forward. We haven’t really seen that much, but that could happen," Jeff Immelt, GE Chairman and CEO, told analysts during the conference call.
U.S. President Donald J. Trump and Republican leaders in Congress are currently in negotiations about legislation that might substantially undo or replace the health law, reports the New York Times. He signed an executive order last week directing federal agencies to stymie Obamacare "to the maximum extent permitted by law," though most experts say the edict can hardly dismantle ACA.