General Electric (GE) stock has made a remarkable run in 2019. So far, the stock has risen 46%. General Electric has beaten all of the major US indexes and its industrial peers. YTD (year-to-date), the Dow Jones, the S&P 500, and the NASDAQ have gained 14.5%, 17.8%, and 21.3%, respectively.
General Electric stock has also outpaced the Industrial Select Sector SPDR Fund’s (XLI) returns. XLI, which invests in S&P 500 industrial stocks, has gained 20.8% in 2019. General Electric stock’s YTD gain was higher than other industrials stocks’ returns. United Technologies (UTX) and Caterpillar (CAT) shares have risen 22.1% and 5.2%, respectively. 3M (MMM) has lost 8.7% of its market value in 2019.
What’s behind the rally?
The heightened liquidity crisis, dividend cuts, and dismal quarterly performances led to a massive sell-off in General Electric stock last year. The stock fell to a ten-year low of $6.40 on December 11, 2018.
However, CEO Larry Culp’s quick actions to implement restructuring initiatives and strengthen the balance sheet helped General Electric regain investors’ confidence, as reflected in the YTD stock performance.
After becoming the CEO in October last year, Culp undertook several restructuring initiatives. Reducing General Electric’s stake in Baker Hughes (BHGE), divesting the healthcare equipment portfolio, revising the spin-off and merger terms with Wabtec, and cutting dividends were some of Culp’s most notable efforts. The strategies mentioned above helped General Electric retain $10 billion in cash in the fourth quarter of 2018.
Culp found a buyer for the BioPharma business unit in the first quarter. The company signed a definitive agreement with Danaher (DHR) to sell the unit for $21.4 billion, which would help reduce its debt.