Key Morningstar Metrics for GE HealthCare Technologies
Fair Value Estimate: $98.00
Morningstar Rating: 4 stars
Morningstar Economic Moat Rating: Wide
Morningstar Uncertainty Rating: Medium
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.