For one thing, GE Healthcare’s financial growth doesn’t compare well against the other business segments. Only GE Capital had worse revenue growth last year. Profit growth for GE Healthcare ranked at the bottom of all the business segments.
GE Healthcare’s sales growth of 1.1% and earnings growth of 4.2% lagged well behind that of Philips Healthcare, which reported sales and earnings growth last year of 6% and 11%, respectively. Siemens also fared better in 2012 than GE. The German corporation’s health care segment posted revenue growth of 9% and profit growth of 36%.
On a positive note, GE Healthcare’s numbers easily surpassed those of Allscripts Healthcare Solutions Inc (NASDAQ:MDRX), which had flat revenue in 2012 compared to the prior year and experienced declining net income. Quality Systems, Inc. (NASDAQ:QSII), meanwhile, outperformed on revenue with 7% growth but saw net income plummet.
GE stock has held its own when compared to these rivals. So far in 2013, shares are up 16% — better than all of the aforementioned companies except Allscripts, which has rebounded this year from a big sell-off in the fourth quarter of 2012. Of course, GE stock’s relative success hasn’t really been due to GE Healthcare.
What’s the bottom line? GE isn’t a bad investment. The stock has performed reasonably well recently and isn’t priced extravagantly. I also like the solid dividend yield of 3.2%.
But is buying GE stock a smart health care play? Despite its enviable position in several health care markets, I think there are better picks in the industry. Maybe one of those pharma stocks getting the buzz would be smarter after all.
Health care might not be GE’s strong point right now, but energy is a different story altogether. For GE, the recent financial crisis struck a blow, but management took advantage of the market’s dip to make strategic bets in energy. If you’re a GE investor, you need to understand how these bets could drive this company to become the world’s infrastructure leader. At the same time, you need to be aware of the threats to GE’s portfolio.
The article Is Buying GE Stock a Smart Health Care Play? originally appeared on Fool.com.
Fool contributor Keith Speights has no position in any stocks mentioned. The Motley Fool recommends Quality Systems. The Motley Fool owns shares of General Electric Company.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.