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Why Shares of General Electric Fell 22% in the First Half of 2018

John Bromels, The Motley Fool

What happened

Shares of General Electric (NYSE: GE) fell 22% in the first six months of 2018, according to data provided by S&P Global Market Intelligence. That was on top of a 44.8% loss in 2017. Since January 2017, the company's stock has lost more than half its value. 

The company's shares have been hovering around the $14 mark since March. It was the worst performer in the Dow Jones Industrial Average for 2017. It earned that distinction in 2018, too, before it was removed from the index on June 26.

An Edison-style light bulb shatters against a dark background

Selling its lighting unit is just one way GE hopes to return to growth. Image source: Getty Images.

So what

General Electric's woes have been so well-documented -- and have persisted for so long -- that it's impossible to pinpoint a single event or metric that caused the stock's poor performance this year. But there were certainly some noteworthy moments that culminated in the company's removal from the Dow (which also caused the stock to drop). 

Possibly its one bright spot came in April, when the company reported Q1 2018 earnings that beat (very low) expectations. The stock actually rose -- for a change -- in response. But even as the reported earnings beat analysts' estimates, management lowered expectations for the year, indicating that earnings from the company's troubled power segment would come in lower than expected, and also that overall earnings per share would come in at the low end of the guidance range. 

GE has been busy selling off units left and right, including:

  • its transportation unit, which is going to be merged with Wabtec;
  • its beleaguered industrial gas turbine business, which is going to private equity firm Advent International;
  • part of its healthcare unit, which CEO John Flannery used to head, to private equity firm Veritas Capital; 
  • its stake in Baker Hughes, a GE Company, which is the product of its oil and gas division's merger with Baker Hughes, and
  • its lighting business, for which it can't seem to find a buyer. 

Now what

General Electric is already a very different company than it was just a few years ago, and these asset sales will transform (read: shrink) it even further. The company's aviation and healthcare businesses have consistently shown strong performance and good margins. But the power segment continues to struggle, and it's unclear where -- or when -- growth is going to materialize in what's left of GE. 

GE's stock seems to have stabilized around $14 per share -- for now -- and it's possible that the worst is over. But even if that's true, it's likely to be a long, hard slog back to growth for this beaten-down industrial conglomerate.

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John Bromels owns shares of General Electric. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.