General Electric outperformed its peers
General Electric (GE) stock has been rising since the beginning of the year. The stock has risen nearly 41% in 2019. General Electric stock has outperformed all of the major US indexes and its industrial peers. YTD (year-to-date), the NASDAQ, the S&P 500, and the Dow Jones Industrial Average have risen 17.9%, 13.7%, and 9.9%, respectively.
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General Electric outpaced the Industrial Select Sector SPDR ETF’s (XLI) return, which has gained 16.4% YTD. XLI tracks the performances of industrial sector stocks included in the S&P 500 Index.
General Electric stock’s YTD gain also outpaced most industrials stocks’ returns. Shares of United Technologies (UTX) and Honeywell International (HON) have risen 25.1% and 28.2%, respectively, YTD. 3M Company (MMM) has lost 8.6% of its market value during the same period.
What drove the rally?
The heightened liquidity crisis, dividend cuts, and dismal quarterly performances led to a massive sell-off in General Electric stock in 2018. The stock fell to a ten-year low of $6.40 on December 11, 2018. The stock has been rising since the beginning of 2019. Investors gained confidence from CEO Larry Culp’s quick actions to lower the company’s debt and improve its liquidity and earnings.
Since becoming the CEO in October last year, Culp has undertaken several initiatives. He reduced General Electric’s stake in Baker Hughes (BHGE), revised the spin-off and merger terms with Wabtec, and sold General Electric’s healthcare equipment portfolio. The initiatives and dividend cuts helped General Electric retaining $10 billion in cash in the fourth quarter of 2018.
During the first quarter, General Electric agreed to sell its bioPharma business unit to Danaher (DHR) for $21.4 billion. After the transaction closes, General Electric will be able to reduce its debt significantly.