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Inflationary pressures are starting to weigh on profit margins for some companies, particularly those with long, complex sales cycles. GE Healthcare’s stock fell 11.3% over the week after it released its first-quarter 2026 earnings.
GE Healthcare sells high-ticket imaging and visualization equipment, which typically involves long sales cycles. That structure can make it difficult to raise prices quickly enough to offset cost inflation. While the company also sells shorter-cycle products—such as patient care equipment and pharmaceutical diagnostics—management said this is not sufficient to provide the flexibility needed to address rising costs.
Management outlined $250 million in increased costs for 2026, broken down as follows:
These cost pressures are expected to reduce earnings per share (EPS) by $0.43 in 2026. Management expects to take cost-mitigation actions that will improve EPS by $0.17, implement price increases that will add $0.06, and generate a $0.05 improvement from non-operational matters.
After these offsets, the net impact for 2026 is a $0.15 reduction in EPS.
Because of the expected EPS headwind, GE Healthcare lowered its full-year EPS guidance to a range of $4.80 to $5, down from a previous range of $4.95 to $5.15.
Despite the margin pressure, the company maintained its full-year organic revenue guidance of 3%-4%. Management’s stance suggests the issue is primarily cost pressure on margins rather than a deterioration in revenue growth prospects.
Management indicated the margin challenges are likely to persist through 2026, in part because long-cycle sales mean it takes time for newly priced orders to convert into revenue as the backlog is worked through. The company’s revenue and margin outlook is therefore expected to improve later in the year and into 2027.
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