Here's Why GE Healthcare Shares Popped Higher Today
Shares in GE Healthcare (NASDAQ: GEHC) were higher by 12% at around 11 a.m. today on the back of its second-quarter earnings report. It's been a difficult year for the company, but the latest results, particularly the order book, are signaling an improvement ahead. Here's why.
The second-quarter earnings came in ahead of expectations. Still, management reiterated its previous full-year guidance: organic revenue growth of 3%-4%, adjusted EPS of $4.80-$5.00, and free cash flow (FCF) of approximately $1.6 billion.It's superficially unimpressive, but the devil is in the detail of the order book, and specifically the 11.1% growth in orders, taking its book-to-bill ratio to 1.15 times, and its backlog to $23.9 billion.
To understand why this is so important, you have to go back to the first-quarter results, when management was forced to lower its full-year earnings guidance on the back of a $250 million increase in costs from memory chips, oil, freight, and raw materials. The cost increase is problematic for a company like GE Healthcare, which has relatively long sales cycles, because it can't react quickly to raise prices and has to work through a backlog secured at prices before the cost inflation hit.
Source Fool.com
