GE (NYSE: GE) stock price bounced back substantially in fiscal 2019 on the back of CEO Larry Culp’s strategy of enhancing the liquidity position. GE shares soared 53% in fiscal 2019, outperforming the broader market rally of 29%.
The share price momentum also outpaced the Dow Jones Industrial Average and SPDR Industrial Select Sector ETF in the past few months.
GE shares grew 38% in the last three months compared to the SPDR Industrial Select Sector ETF and the Dow Jones Industrials growth of 10.8% and 10.3%, respectively. Its share price performance was best since 1982. Before the fiscal 2019 rally, GE shares lost substantial value in the past two years.
GE Stock Is Likely To Extend Performance in 2020
Market analysts and investors are showing confidence in the future fundamentals of GE stock price. The company has been successfully declining its debt along with improving its cash position.
The company is enhancing its liquidity position by selling noncore assets and investing in only a few key areas such as industrial, and power businesses.
Investors are praising Larry Culp’s strategy of targeting less than 2.5x net debts to EBITDA in GE’s industrial business combined with 4.5x debts to total capital.
Analysts have raised their price target for GE shares. UBS analyst Markus Mittermaier provided a Buy rating with the stock price target of 14. The analyst said, “GE shares are at a positive inflection point into 2020 given the company’s successful de-levering, strong estimated earnings growth in 2020 and 2021, and a tripling of free cash flow to $2.3B next year.”
Improving Cash Position and Declining Debt is Biggest Catalyst
The company had sold billions of dollars of assets in the past couple of quarters to reduce its debt position. It announced or completed almost $9B in total industrial deleveraging actions in the past quarter alone. The company expects to generate almost $2 billion in industrial free cash flows in fiscal 2019.