GE HealthCare Technologies Inc. (NASDAQ:GEHC) saw its shares climb sharply in premarket trading Wednesday after the company delivered second-quarter results that surpassed analyst expectations and set a new record for orders. The stock gained 9.9% to $70.43 ahead of the opening bell, with regular U.S. cash trading yet to commence.
Record Orders Drive Optimism
The company reported organic orders rose 11.1% year-over-year, a significant acceleration from the 1.1% increase recorded in the prior quarter. The backlog reached an all-time high of $23.9 billion, up from $21.8 billion at the end of the first quarter. The book-to-bill ratio, a key metric comparing orders to revenue, improved to 1.15 from 1.07, indicating stronger forward revenue coverage. Organic sales, which strip out acquisitions and currency effects, grew by a more modest 3.5%.
Earnings Beat Expectations
Revenue for the second quarter rose 5.7% to $5.295 billion, exceeding the analyst consensus of $5.26 billion. Adjusted earnings per share came in at $1.13, compared to the anticipated $1.04. Net income increased to $561 million from $486 million in the same period last year. However, earnings quality was mixed: tariff refunds added $129 million to net income, while adjusted EBIT totaled just $23 million. The company excluded an additional $106 million related to 2025. The reported adjusted EBIT margin fell 40 basis points to 14.2%; excluding the $23 million refund, the margin stood near 13.7%, implying an annual decline of approximately 90 basis points.
Segment Performance Highlights
During the quarter, GE HealthCare merged its Imaging and Advanced Visualization units into a single segment, creating a clearer portfolio structure. The combined Advanced Imaging Solutions & Pharmaceutical Diagnostics segment generated $4.61 billion in revenue, up 9.3% year-over-year, with a segment EBIT margin of 16.8%. This division accounted for 87.1% of total company revenue. In contrast, Patient Care Solutions posted revenue of $675 million, down 13.3%, and swung from an EBIT of about $60 million to a loss of $26 million, with a negative margin of 3.8%. Nearly 80% of the EBIT increase from the other divisions was offset by this reversal.
CEO Peter Arduini highlighted the company achieved “record orders and backlog” and noted that GE HealthCare is “reviewing strategic options” for the Patient Care Solutions business, according to a regulatory filing.
Peer Comparison and Guidance
In comparison, Royal Philips (AMS:PHIA) reported a 4% rise in comparable sales this week, but its comparable order intake slipped by 1%. Philips’ adjusted EBITA margin stood at 16.4%, boosted by a 4.2 percentage point benefit from a tariff refund. GE HealthCare’s order growth was notably firmer.
GE HealthCare maintained its full-year guidance for organic growth of 3% to 4% and an adjusted EBIT margin of 15.4% to 15.7%. The company reiterated its adjusted EPS outlook of $4.80 to $5.00 and free cash flow guidance of approximately $1.6 billion.
Cash Flow and Risks
Cash conversion remains a concern. Free cash flow for the quarter reached $68 million, benefiting from a $107 million cash refund. Excluding that refund, free cash flow would have been an outflow of about $39 million. Key risks include a potentially lengthy process to resolve or divest Patient Care Solutions, ongoing cost inflation of approximately $250 million from chips, oil, and freight, and the need to convert the record backlog into revenue without further margin erosion. Shares at $70.43 are still roughly 22% below their January 8 peak, leaving a substantial price gap. Investors now watch to see if the record backlog will translate into higher-margin revenue.
