GE Healthcare says strong U.S. growth offset weakness abroad

The Voluson E10 ultrasound system--Courtesy of GE Healthcare

GE ($GE) touted the strength of its healthcare business in the U.S., saying the country compensates for slowing growth in countries like Japan and Russia and is a headwind against unfavorable exchange rates abroad.

Orders at GE Healthcare were up 9% in the U.S., led by a 17% increase in healthcare equipment orders, due to the launch of the Revolution CT Scanner and E10 Voluson women's health ultrasound system, the company said.

Overall, revenue in the healthcare segment rose by a negligible amount in Q4 and remained around the $5.1 billion level. But GE CFO Jeffery Bornstein said that GE Healthcare "had a better quarter than the headline results would suggest" because weakening exchange rates abroad are masking positive organic growth.

Bornstein said that aggregate healthcare orders were up 1%, but rose 4% when excluding the effects of foreign exchange rates. For example, European orders were down 1%, but rose 5% after taking exchange rate fluctuations into account.

It's harder to put a positive spin on Japan's 23% decline in orders and a 26% decline in the Middle East, although those numbers are also likely due to factors beyond the company's control, like a rise in Japan's consumption tax.

On the bright side, earnings in the life sciences division grew 15% in 2014, CEO Jeffrey Immelt said during the earnings call.

In an interesting exchange, Bornstein responded to an equity analyst's concerns about over-reliance on cost-cutting as a means of driving profits by saying "I think you're right," adding, "I think in healthcare, managing the pricing is going to be a key part of how we get enhanced gross margin improvement in that specific business."

GE Healthcare profits fell 4% year over year in Q4 to just above $1 billion, and at slightly more than $3 billion, the unit's annual profits were basically unchanged from 2013.

As a whole, the conglomerate reported quarterly earnings of $5.15 billion in Q4. Revenues rose 4% to $42 billion. The company's stock is up about 1.5% today as of the early afternoon.

- more information about GE's Q4 earnings

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