What happened

The shares of Baker Hughes, a GE Company (NYSE:BKR) jumped just under 12% in February, according to data provided by S&P Global Market Intelligence. The increase was pretty even throughout the month, and added to January's advance to give the stock a year-to-date gain of roughly 26%. The solid February showing was helped along by the company's full-year 2018 earnings, which were released at the end of January.

So what

Baker Hughes has been struggling for a couple of years, but it appears to have reached a turning point in 2018. Revenue was up 5% on strength in the core oil-field services division (which makes up nearly half of the company's top line). That division saw a sales increase of 12%. The company's adjusted operating income, meanwhile, rose a stunning 62% year over year in 2018.

Check out the latest earnings call transcript for Baker Hughes.

Two men working next to an oil well

Image source: Getty Images.

With results like that, you can understand why investors were upbeat on Baker Hughes' stock in February. That sentiment was only bolstered on Feb. 7 when the company reported both a year-over-year increase in total rigs operating worldwide and a sequential monthly increase. That was a clear indication that the operating environment in which this energy services company is working remains fairly healthy. 

But there is more to the story. General Electric Company (NYSE:GE) owned roughly 50.4% of Baker Hughes at the end of 2018. However, the troubled industrial conglomerate materially reduced its stake in the company in the final quarter of the year, trimming it from 62.5% in November. GE's decision to sell shares has been a headwind to Baker Hughes' stock because there are concerns that GE has been operating from a position of weakness.

However, recent moves by GE to raise cash have shifted the equation a little. The sale of Baker Hughes stock is part of this, but the bigger deal was the announcement that GE is offloading a portion of its healthcare business to Danaher. That $21 billion deal will greatly strengthen GE's financial position. As a result, it may not need to sell assets, such as its remaining stake in Baker Hughes, at fire-sale prices. As the risk that GE will keep selling Baker Hughes' stock "at any price" has lessened, there's an extra reason for investors to be positive.

Now what

GE and Baker Hughes are still tied at the hip. While it's nice to see Baker Hughes' business starting to improve after a long period of weakness, conservative investors might still want to be cautious. The relationship with GE, which has been desperate to find cash to pay down debt, is still a little worrying. Yes, GE's deal with Danaher should reduce the urgency to sell its stake in Baker Hughes. But GE's turnaround is a work in progress, and the overhang from its move to reduce its stake in Baker Hughes really isn't gone just yet. If you are watching Baker Hughes, make sure to also watch GE.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.