GE Healthcare’s Q1 Win Masks a Tariff Tempest: Is This a Buy?

GE Healthcare is having a moment—its Q1 results beat expectations, but behind the numbers lurks a storm of tariffs that could sink its stock. Here’s what investors need to know.

The Q1 Victory Lap

GE Healthcare’s first-quarter results were a triumph on the surface. Revenue rose 3% to $4.8 billion, driven by 4% organic growth, while net income surged 51% to $564 million. Earnings per share (EPS) jumped to $1.23, outpacing estimates. The Imaging and Pharmaceutical Diagnostics (PDx) segments shined:
- Imaging: Revenue up 5% organically, fueled by sales of MRI and CT systems like the Revolution™ Vibe CT (a game-changer for cardiac imaging).
- PDx: Soared 8% organically after acquiring Nihon Medi-Physics, which expanded its radiopharmaceutical portfolio. The U.S. launch of Flyrcado™, a PET imaging agent, added rocket fuel.

CEO Peter Arduini called it a “solid start,” and with a record backlog and 10% organic order growth, there’s momentum. But here’s the catch: tariffs are about to rain on this parade.

The Tariff Tsunami Hitting GE’s Bottom Line

The company slashed its 2025 outlook, citing U.S. trade policies. Key hits:
- Adjusted EPS: Now $3.90–$4.10, down 13%–9% from 2024’s $4.49. Tariffs alone cost $0.85 per share—a massive 19% of the new low end.
- Free Cash Flow: Dropped to $1.2 billion (from $1.75 billion) due to tariff-driven inventory costs.
- Margins: EBIT margin narrowed to 14.2–14.4%, a 2.3% hit from 2024’s 16.3%.

The culprit? U.S. tariffs on Chinese imports (now at 145% cumulative rates) and a 90-day tariff pause set to expire July 9. GE estimates $500 million in annual tariff costs, with China alone accounting for $375 million.

Can GE Weather the Storm?

Management isn’t just sitting on its hands. They’re fighting back with:
1. Local-for-local manufacturing: Building products in regions they sell to (e.g., U.S. MRI systems for U.S. hospitals) to avoid cross-border tariffs.
2. USMCA compliance: Leveraging exemptions under the U.S.-Mexico-Canada Agreement to reduce North American tariff pain.
3. Dual sourcing: Diversifying suppliers to avoid over-reliance on China.

The $1 billion share buyback announced this quarter signals confidence in long-term resilience. But here’s the rub: if tariffs on China don’t ease, GE’s free cash flow could drop further. CFO Jay Saccaro admitted a worst-case scenario could cost another $0.85 per share if paused tariffs snap back July 9.

The Bottom Line: Buy the Dip or Bail?

GE Healthcare’s Q1 win is real—but its 2025 outlook is a gamble on trade policy. Bulls cite:
- Strong demand in imaging and PDx (Flyrcado’s potential is massive).
- $1 billion buyback boosts EPS and signals confidence.
- Mitigation strategies could cut tariff pain by 50% by 2026.

Bears counter:
- Tariffs could get worse, not better. If China’s rates hit 245%, as some White House threats suggest, GE’s 2025 EPS could crater.
- Free cash flow is already down 31%—a liquidity hit that could crimp innovation.

The sweet spot: Buy if shares dip below $65 (a 20% discount to recent highs) and hold for 1–2 years if tariffs stabilize. But if trade wars escalate? This stock could be a casualty.

Final Call: GE Healthcare is a long-term bet on healthcare innovation, but tariffs are a clear near-term risk. For now, wait for a pullback—then load up. The PDx division’s growth and imaging dominance are too strong to ignore.

Data as of April 30, 2025. Always consult your financial advisor before making investment decisions.