According to the news report by MarketWatch, General Electric Co.’s surged on Thursday morning after the industrial behemoth released its fourth quarter results. The company’s stock went by almost 18% to trade at $10.73 when GE posted year-to-date gains of nearly 40%. In 2018, the company posted about 57% of losses and was removed from the Dow Jones Industrial Average.
The way the company’s shares are rising, this would mark the company’s best day in the stock market since March 10 in 2009, when GE’s stocks went up by 19.7%.
However, despite its overall gains, the company still had a poor performance in its core business of power. Added to that, the company’s GE Capital business unit still faced legacy problems. Both of these issues continued to pull down the company.
According to Bloomberg’s report, the new Chief Executive Officer Larry Culp gave details of how he has focused on reducing the company’s crippling debt, fix the struggling power unit and also ease continued uncertainties that have been pulling down the company’s shares.
The company also announced that it had reached a deal to settle a probe by the US Department of Justice into GE’s now-defunct subprime-mortgage business for a lower amount than what investors had feared.
After the company reported its earnings on Thursday, Culp stated in an interview that GE was going to deleverage its balance sheet along with strengthening its business operations. He also said that they were going forward with a level of practicality, transparency with regard to where they were and where they were going, and how the company was taking care of their issues.
Since he took over from John Flannery in October last year, Culp announced the sinking power unit’s restructuring, replaced people in key roles, and took steps to segregate businesses into stand-alone units.
The steps taken by Culp in the last few months, plus the lack of any bad surprises, has helped the new CEO’s efforts to get the company out of its worst plunge in its 127-year history.
Since the beginning of the year, GE’s shares have gone up a massive 34%, which is the biggest jump seen in the S&P’s Industrial sector.
This quarter’s results are a huge turnaround from Culp’s first quarterly results conference call last year in October. He had taken up the role of CEO only a few weeks prior to that call, and he had slashed dividend and also revealed to investors that the company’s power business had a $22 billion charge. That day, the company’s shares plunged by 8.8%, taking the total drop in the company’s shares to 57% for the year.
Thursday’s call was a turnaround. William Blair & Co.’s analyst Nicholas Heymann stated that things were moving in the right direction in GE now. He said that there were clear signs that actions were speeding up to improve not only the company’s liquidity but also to reduce GE debt and remove unknowns from the equation.
One big question mark that had been resolved was the settlement of the probe by the Justice Department for $1.5 billion; the company had already set aside a reserve for this. According to Goldman Sachs analyst Joe Ritchie, that sum was around half of what the investors had been expecting.
Culp also announced that about 50% of the company’s healthcare unit would be monetized. Analysts had expected that the company would sell a smaller portion of it via a spin-off.
However, according to Culp’s plans for the healthcare unit, and his plans for other possible sales, the company could generate about $50 billion which would be used to reduce the company’s leverage.