Here's Why GE Healthcare Shares Slumped This Week
Key Points
GE Healthcare's stock dropped 11.3% after Q1 2026 earnings.
Rising costs are pressuring margins, leading to lowered EPS guidance.
Long-cycle sales delay the impact of price increases on revenue.
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Inflationary pressures are starting to bite into profit margins for some companies, particularly those with long, complex sales cycles, such as GE Healthcare (NASDAQ: GEHC). That's why the company's stock declined 11.3% in a week after it released its first-quarter 2026 earnings.
GE Healthcare lowers guidance
The healthcare company sells relatively high-ticket imaging and visualization equipment, which tends to have long sales cycles, making it difficult for the company to immediately raise prices to offset cost inflation. While it also sells shorter cycle products like patient care equipment and pharmaceutical diagnostics, it's not enough to give it the agility to deal with rising costs.
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Unfortunately, costs are rising, with GE Healthcare management outlining $250 million in increased costs, comprising $100 million from memory chips, $100 million from oil and freight costs, and $50 million from raw materials, including tungsten metal. These impacts are set to reduce earnings per share (EPS) by $0.43 in 2026. Management expects to take cost-mitigation actions that will improve EPS by $0.17 and implement price increases, resulting in a $0.06 improvement, alongside a $0.05 improvement from non-operational matters.
When all is said and done, the net impact in 2026 is a $0.15 reduction in EPS, which is why management lowered its full-year EPS guidance to $4.80 to $5 from a previous range of $4.95 to $5.15.
Image source: Getty Images.
Where next for GE Healthcare
Interestingly, the company maintained its full-year organic revenue guidance of 3%-4%, implying the problem is cost pressure on margins rather than a decline in revenue growth prospects. Those problems look likely to persist through 2026 because, as noted earlier, a lot of the company's sales are long-cycle, so it will take time to work through the backlog on previous pricing before the newly priced orders start to convert into revenue. As such, expect the company's revenue and margin outlook to improve later in the year and into 2027, making the stock attractive to long-term investors looking to buy on a dip.
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Lee Samaha has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends GE HealthCare Technologies. The Motley Fool has a disclosure policy.
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