GE has tipped its healthcare division to achieve low to mid-single-digit growth in 2021 as the imaging, ultrasound and pharmaceutical diagnostics markets rebound.
Last year, GE Healthcare grew 4% on an organic basis as demand for ventilators and other equipment used in the response to COVID-19, offsetting the disruption to elective procedures and other services.
With the accelerating vaccine rollout giving GE confidence that the disruption will abate in 2021, management is forecasting healthcare growth despite the loss of certain benefits from the pandemic.
GE Healthcare, like many medtech companies, saw its sales fall in the second quarter as COVID-19 stopped elective procedures and other medical interactions. However, demand for ventilators helped GE to recover, causing the company to grow organically in the back half of 2020 and end the year up 4%.
Talking at a 2021 investor outlook event, GE Healthcare CEO Kieran Murphy projected the momentum the company built up late in 2020 to continue amid strong and improving market fundamentals.
“We're expecting low single-digit to mid-single-digit revenue growth, driven by improved commercial execution and steady services growth, both in support of our installed base and by expanding our digital solutions,” Murphy said. “We are seeing procedure volumes increasing, contributing to the rebound of our pharmaceutical diagnostics business and we see sequential market growth in imaging and ultrasound.”
GE is also looking to its services business to drive growth. Murphy said GE is working to “upgrade systems with analytics for clinical and productivity improvements” to turn its installed base into a growth driver. Murphy expects the trends to translate into low to mid-single-digit growth across GE Healthcare in 2021.
The growth will support increased R&D spending, notably in digital and AI apps, which is in turn expected to fuel an increase of low to mid-single-digits in the years to come. GE Healthcare expects to continue expanding R&D investment in digital and AI in 2022, while also rolling out new hardware.
Capital expenditures are set to return to pre-pandemic levels this year.
With lean initiatives predicted to reduce inventory and improve on-time delivery, GE expects free cash flow to at least equal the $2.6 billion generated last year. Free cash flow is forecast to be flat to slightly up this year and flat to up in 2022. GE said little about how the company will deploy the cash.