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GE HealthCare: Initiating Coverage With Wide Moat, Shares Look Attractive

The company has a firm footprint in hospitals and health networks worldwide, and it is positioned to benefit from long-term trends.

Logo of General Electrics HealthCare at the facilities of US medical technology company GE HealthCare, as part of a visit dedicated to energy savings and conservation in Buc, outside Paris, on March 11, 2024.
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GE HealthCare Technologies Inc Common Stock

Key Morningstar Metrics for GE HealthCare Technologies

We initiate coverage of GE HealthCare Technologies GEHC by assigning the stock a wide moat and a fair value estimate of $98 per share. We think it is an attractive long-term investment, and we believe the company’s stand-alone status will allow management to focus on research and development, ensuring its position as one of the top three global leaders in the medical imaging market remains secure in the long run.

GE HealthCare has a firmly established footprint in hospitals and health networks worldwide, and it is positioned to benefit from long-term healthcare trends, including aging populations, growing demand for early detection and monitoring of cancer and other diseases, and increasing utilization of minimally invasive and noninvasive procedures.

We project revenue to grow at low to mid-single digits over the next 20 years, in line with our projections for healthcare spending and economic growth in the territories the firm sells into. Over the next five years, we project operating profit margins to rise from 12.5% in 2023 to 16.0% in 2028 as management optimizes its product mix and cost structure as a stand-alone company.

The medical imaging industry is a moderately consolidated oligopoly, with the top three players—GE HealthCare, Siemens Healthineers SMMNY, and Koninklijke Philips PHG—controlling about 70% of the market. Like its peers, GE HealthCare has invested heavily over many decades to build a comprehensive product portfolio and extensive 24-hour servicing networks, which are crucial for selling to big hospitals and health networks. The company’s large installed base also facilitates sales of software platforms and multi-year servicing contracts that further deepen its integration into healthcare providers’ workflows. Although smaller players can compete in specific technologies or geographies, we think it would take a long time for a newcomer to build the portfolio breadth, servicing networks, reputation, and large installed base necessary to compete with the top three players.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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About the Author

Jay Lee

Senior Equity Analyst, Healthcare
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Jay Lee is a senior equity analyst for Morningstar Asia Limited, a wholly owned subsidiary of Morningstar, Inc. He covers Chinese and Japanese healthcare companies.

Before joining Morningstar in 2017, Lee was an executive director and Asia head of mortgage products at Goldman Sachs, where he spent 11 years working on trading desks in New York, Tokyo, and Hong Kong.

Lee holds a bachelor’s degree in mathematics from Brown University.

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