GE stock rallied in the first quarter
Shares of General Electric (GE) have been surging since the beginning of the year and have probably seen the highest gain ever in a first quarter.
The company’s shares jumped over 37% in the first quarter, outperforming all major US indexes as well as its industrial peers.
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The Dow Jones Industrial Average, the NASDAQ, and the S&P 500 registered gains of 11.2%, 16.5%, and 13.1%, respectively, in the first quarter. GE also outperformed the return of the Industrial Select Sector SPDR ETF (XLI), which tracks a market cap–weighted index of the industrial sector stocks included in the S&P 500 Index. The ETF gained 16.5% in the first quarter.
GE’s first-quarter return also outpaced the gains of the majority of industrials stocks. Shares of Honeywell International (HON) and 3M Company (MMM) were up 20.3% and 9.1%, respectively, in the first quarter.
What’s driving this optimism?
GE’s dismal quarterly performances, heightened liquidity crisis, and dividend cuts led to a massive sell-off in its stock in 2018. The stock even sank to a ten-year low of $6.40 on December 11, 2018. GE stock has been rising once again since the beginning of 2019 as investors gained confidence from CEO Larry Culp’s efforts and quick actions to lower the company’s debt and improve its earnings and liquidity.
Over the last four months, Culp has undertaken several initiatives, including the sale of GE’s healthcare equipment portfolio, the reduction of its stake in Baker Hughes, a GE company (BHGE), and its revision of its spin-off and merger terms with Wabtec. The industrial conglomerate’s fourth-quarter earnings release revealed that these initiatives, along with dividend cuts, had helped the company to retain $10 billion in cash.
Further, the company has agreed to sell its BioPharma business unit to Danaher (DHR) for a total consideration of $21.4 billion. Upon completion of the transaction, GE will be able to lower its debt drastically.