Does General Electric's Innova Solution Hold Up?

by: Adetokunbo Abiola

General Electric (NYSE:GE) has released Innova EPVision 2.0 to enable live visualization of the anatomy for a wide range of procedures without additional cost of installing other gadgets. The solution is useful for enhanced visualization when the cost of mapping procedure may be too expensive. In this article, I want to show how the trend in the organ imaging market will favor the sales of General Electric's product. I especially want to look at how innovation in the organ imaging sector is creating niche markets for ultrasound, enabling General Electric to make better sales with its solution. The development will enable the company to improve its numbers.

Why do I have this conviction? According to research reports from Reporterlinker's "Ultasound market Outlook to 2016," developments and innovations such as 3-D/4-D in the organ imaging sector have increased ultrasound sales in the past few years. Consequently, the global market for ultrasound equipment is projected to increase. Resource-rich nations and emerging economies such as India and China will be investing a lot of money in these high-end products due to construction of new hospital facilities. This will create more market for Innova EPVision in the next few years, improving General Electric's healthcare division revenues.


There is no doubt market trend favors General Electric's sales growth with the new solution. Previous products propelled the healthcare sector to 2012 Full-Year sales of $18.29 billion from $18.08 billion. The sector grossed $5.18 billion in the fourth quarter, compared with $15.16 billion in the same period in the year prior. It boosted full-year operating EPS to $1.5, up 16%. Fourth-quarter continuing EPS was $0.44, up 13% year-over-year.

"We ended the year with a strong quarter despite the mixed global economic environment," said GE Chairman Jeff Immelt. "The outlook for developed markets remain uncertain, but we're seeing growth in China and the resource-rich countries. With our latest backlog in history and a substantial amount of cash generated by our businesses in the fourth quarter, we have a great momentum going into 2013."

In the first-quarter report, the healthcare sector's profit rose to $595 million, compared with $585 million in the same period the year before. It enabled General Electric to record earnings of $4.1 billion, up 14% from first-quarter 2012. Operating EPS was $0.39, up 15%.

"Our equipment orders were strong in the quarter, growing 10%, with oil and gas orders up 24%, and aviation up 47%," said Immelt. "In growth markets, equipment and service orders grew 17%. We ended the quarter with our biggest backlog in history."

Healthcare Sector

General Electric healthcare division has products to support Innova to further boost sales. Its new low-dose imaging protocol gives users exposure rate option with a half dose reduction compared to competing ones. DoseMap furnishes physicians with dose information during complex intervention. The Dose Blueprint enables positive radiation management through new innovative dose solution.

Innova EPVision 2.0 increases the range and expands the functions of solutions in the lab. "Since every EP lab has recording and fluoroscopy, GE customers with cardiolab and Innova can now realize the benefits of real-time navigation in 3-D models, including tagging structures with color-coded activation times, without incurring the additional cost of specialized supplies," said Jean Michel Milles, GM, GE Healthcare.

General Electric needs the new product and others to generate revenue and cut down on its huge debt of $397.30 billion. Fortunately, the company's healthcare products are also driving revenue like other sectors. The new product is also important to General Electric so it can be ahead of its rivals in the market.

Looking at the recent reports, we notice the healthcare sector showed year-over-year growth. It is clear General Electric has been improved by it. So it can be said that the company is making progress in its operations.

With a price-to-sales ratio of 1.61, it is trading cheaply, not surprising since it has a gross margin of 25.42 The new product will increase revenue with time, improving the EPS of 1,35. Investors will benefit from robust earnings that establish a new benchmark for performance.


With price to sales of 1.61, compared with 0.89 for Siemens (SI) and 3.48 for Johnson & Johnson (NYSE:JNJ), price to earnings of 16.30, compared with 16.96 for Siemens and 23.29 for Johnson & Johnson, and gross margin of 25.42%, compared with 28.10% for Siemens, General Electric is on par with competitors. Siemens has products such the Luminos Agile, which is used for fluoroscopy and radiography. But Innova fuses cardiac models with live fluoroscopy and color codes them with activation intervals through signals. Johnson & Johnson has monitors for orthopedic, implants, cardiovascular diseases, and others. But Innova provides visualization of the anatomy for procedures when previous solutions may prove ineffectual.


Based on the previous performance of General Electric's healthcare sector and Innova's unique features, we can say the new solution will increase the revenues of General Electric with time. Looking at General Electric's price multiples in relation to others, the company's debt, and improving revenues, we can say HOLD General Electric for now.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.