Shares of General Electric (GE 1.20%) gained 19.1% in October, according to data provided by S&P Global Market Intelligence, thanks to the company's strong third-quarter earnings report. The company's long-suffering shareholders received reason to believe GE's turnaround is gaining traction, and that sent the shares higher.
GE shares have lost more than 80% of their value since the company's turn-of-the-century heyday as a combination of market-topping acquisitions and large debt pile has weighed on results. The company went through a series of false starts and CEO changes in an attempt to regain its footing, but it appears current head Larry Culp, on the job since late 2018, is beginning to get results.
In October, the company announced third-quarter results that beat expectations, with Culp saying the transformation is "accelerating." GE has achieved about 75% of its target of more than $2 billion in cost reductions and $3 billion in cash improvements in 2020, while reducing its debt by $11.7 billion to date.
GE also said it expects to generate positive free cash flow from its industrial businesses in 2021, and should be able to generate $2.5 billion in cash in the final quarter of 2020. That's an important benchmark for the company, which has been dealing with multiple turnaround efforts inside its industrial holdings.
Make no mistake, GE still has a lot of work to do. Its energy businesses continue to struggle, and its aviation unit that was expected to be a strength in 2020 has turned into a weakness as airlines scale back flying due to the pandemic.
We're still in the early days of a turnaround, but GE if nothing else provided investors with a reason to believe the plan Culp has put into place is bearing fruit. The stock has a long way to go before touching the highs it enjoyed two decades ago, but investors came out of earnings season believing the company is heading in the right direction.