General Electric Co. (NYSE: GE) will open on Monday after its best week since before the 2007 – 2009 Recession. Total growth over the first week of October was 17%. On Friday, shares in the company made impressive gains of 4.1%. Perhaps most impressive of all, is the fact that GE managed this in a week where the S&P 500 index dropped by -0.55%.
News of a New General Electric CEO is Driving Investor Confidence
As reported last week, GE has ousted CEO John Flannery in favor of Lawrence Culp Jr., a seasoned businessman and company executive. The new CEO will receive a compensation package that is focused on bringing the company into a period of profitability with better earnings per share.
GE told investors that Culp Jr. will receive performance share units as an integral part of his compensation. These units will only reward the CEO with equity if stock value can gain a minimum of 50% over a four-year period.
This has pleased investors, who saw the previous CEO as overly conservative and at times ineffective. Flannery’s compensation package only required that he meet 20% of the company’s financial goals.
The new CEO and compensation structure will mean that General Electric has as much focus on its financial performance as it does on its long-term strategy. For investors, this is the best news that could have come from the struggling company.
Not Quite Out of Negative Territory
While the last week was extremely positive for investors, it hasn’t overshadowed the company’s steep share price decline over the last two years. Under CEO John Flannery, GE stock tumbled by 56%.
Lost profits and poor operational performance have been a key reason for GE’s fall from grace on the stock market. Under Flannery’s leadership, dividend yields were compromised, and this caused investors to sell in droves. The company also made several errors with forecasts that could not be met. 2017 is a key example, with the company having to cut its profit forecast from $13 Billion to $7 Billion at the end of the year.
Analysts are optimistic that leadership change will be key to bringing the company back to profitability, and the change also represents the perfect time for non-invested parties to consider buying into General Electric stock while it is low.
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