During his first month running General Electric, Larry Culp trimmed the average monthly decline in the manufacturer’s stock by about 75 percent.
By purchasing $2.2 million worth of its shares on Nov. 1 — two days after a dour forecast, a dividend cut and disclosure of a Justice Department probe reaccelerated the earlier decline — he’s betting that he can reverse the drop and start pushing the shares upward.
The former head of industrial company Danaher, Culp was appointed to GE’s top job at the start of October, replacing John Flannery, who presided over a 54 percent drop in the company’s stock during a little more than a year at the helm after Jeff Immelt’s departure.
Culp’s record, which includes 14 years in which Danaher stock grew at five times the pace of the S&P 500, suggests he may be able to pull off the turnaround, said Steve Winoker, an analyst with Swiss lender UBS who upgraded his rating on the stock to buy from hold.
“Let’s be clear — Larry Culp is key to our upgrade,” Winoker said in a report. “Despite all the differences from the experience with Danaher, we think Culp will succeed in improving the businesses, optimizing capital allocation and cleaning up whatever needs to be cleaned up over time.”
Culp’s latest purchase, disclosed in a regulatory filing on Monday, increased his stake in the Boston-based company by 60 percent to $5.81 billion.
GE, founded by American inventor Thomas Edison and once known for its leadership training strategies, has struggled after a sharp downturn in the electrical-generation market following Immelt’s $10 billion acquisition of France-based Alstom SA’s power business left it unable to meet cash-generation targets in 2017.
Flannery took over amid the fallout, mapping out an aggressive strategy to exit businesses like locomotives and health care and halving the popular dividend to 12 cents a quarter. Culp announced Oct. 30 that he was slicing the payout again, to just a penny, to save $3.9 billion a year.
“Getting to know this company better from the inside has only strengthened my conviction that GE has considerable strengths,” he told investors last week. “The talent here is real, the technology is special and the global reach of the GE brand and our relationships are truly impressive, but GE needs to change.”
GE is paying Culp a base salary of $2.5 million a year, 25 percent more than Flannery, his short-tenured predecessor.
The company said in a regulatory filing that it has agreed to pay Flannery severance of $4.25 million. He is also eligible for a long-term bonus based on the company’s performance from 2016 through 2018 and will retain his pension.
Flannery “made a number of important contributions as CEO,” Culp said last week. “I have the utmost respect for John and wish him nothing but the best going forward.”
GE fell 0.1 percent to $9.28 in New York trading on Tuesday.
