General Electric stock
General Electric (GE) stock has risen ~33% in 2019. The stock has beat 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 returned 10.5%, 9.5%, and 6.4%, respectively.
General Electric stock has also outpaced the Industrial Select Sector SPDR Fund’s (XLI) returns. XLI invests in industrial stocks listed in the S&P 500 Index. XLI has gained 12.6% in 2019.
General Electric stock’s YTD gain was higher than other industrials stocks’ returns. United Technologies (UTX) shares have risen 20.2%. 3M (MMM) and Caterpillar (CAT) have lost 15.1% and 4.5% of their respective market value in 2019.
What’s behind the rally?
Back-to-back dismal quarterly performances, the heightened liquidity crisis, and dividend cuts 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. Since the beginning of 2019, General Electric stock has gained investors’ confidence. CEO Larry Culp worked quickly to restructure the company’s business and improve its liquidity and earnings.
Culp has undertaken several restructuring initiatives since he became the CEO in October. His most notable efforts include revising the spin-off and merger terms with Wabtec, reducing the company’s stake in Baker Hughes (BHGE), and divesting the healthcare equipment portfolio. These actions, along with the dividend cut strategy, helped General Electric retain $10 billion in cash in the fourth quarter of 2018.
In the first quarter, Culp found a buyer for General Electric’s BioPharma business unit. The company agreed to sell the business unit to Danaher (DHR) for $21.4 billion, which would help General Electric reduce its debt.