Shares of General Electric Co. surged Monday after a deal to sell its biopharma business for $21.4 billion in cash to Danaher Corp, but remained on track to extend their longest streak below the widely watched 200-day moving average in at least 40 years.
GE said the biopharma business, which was part of GE Life Sciences and under the GE Healthcare umbrella, generated about $3 billion in revenue in 2018. Lawrence Culp, who was named GE’s chairman and chief executive in October 2018, had been CEO of Danaher from 2001 to 2014. He had recently indicated that he planned to spin off the entire health-care unit in an initial public offering later this year.
GE GE, +6.39% said the deal reached with Danaher DHR, +8.52% will allow it to speed up its plan to pay down debt as it continued to look to strengthen its balance sheet. The news comes on the same day that GE completed the merger of its transportation business with Wabtec Corp. WAB, +6.41% terms of which were amended last month.
GE shares shot up 6.4% in very active trade to close at a four-month high, but pared earlier gains of as much as 15.5% to an intraday high of $11.75. Volume spiked to over 290.2 million shares, nearly triple the full-day average.
The stock had briefly traded above its 200-day moving average (DMA), which many on Wall Street view as a dividing line between longer-term uptrends and downtrends, but has pulled back below the key chart level. Read more about the 200-DMA.
FactSet, MarketWatch
The 200-DMA adjusted to $10.92 at Monday’s close, according to FactSet, and has been falling by roughly 2 cents a day in recent weeks. The stock hasn’t closed above its 200-DMA since Jan. 19, 2017.
The current 526-session streak below the key technical threshold is the longest such stretch since data is available on FactSet going back to February 1979. The previous longest sub-200-DMA stretch was 335 sessions, which ended July 1, 2009.
The shares have now run up 55% since closing on Dec. 21, 2018, at $6.71, which was the lowest close since it hit a financial-crisis bottom of $6.66 on March 5, 2009. However, the shares have remained in technical limbo above the 50-day moving average—a short-term trend tracker—but below the 200-DMA since Jan. 7, 2019. That 34-day streak in limbo would be the longest since the 51-day stretch ended June 12, 2009.
S&P Global Ratings said the proposed sale of the biopharma business suggests GE’s leverage reduction “could be more significant that we currently anticipated,” but the deal does not affect GE’s longer-term credit rating of BBB+ or the stable outlook on the company. The BBB+ rating is three notches above “junk” status.
Fitch Ratings also kept its rating at BBB+, but said the outlook is still negative because of concerns over weak free cash flow, the risk of additional support being required for GE Capital, regulatory investigations and significant challenges at its power business.
Meanwhile, analyst Jim Corridore at CFRA affirmed his buy rating on the stock and lifted his price target to $15 from $13. He said GE’s decision to sell off its biopharma business while retaining the medical imaging portion of GE Healthcare shows that the company is ”thinking creatively and intelligently” as it makes “rapid progress” on its transformation plan.
See related: GE in crisis mode as its stock suffers worst 8-day run since March 2009.
GE, which reported fourth-quarter and full-year 2018 results on Jan. 31, said it would file audited 2018 results with the Securities and Exchange Commission some time this week. The company said Culp will present at the J.P. Morgan Aviation, Transportation and Industrials conference on March 5, will host a GE Insurance “teach-in” conference call for investors on March 7 and will have a “GE Outlook” conference call on March 14.
Also read: GE’s stock rockets to biggest gain in 10 years as CEO Culp embraces reality over hope.
GE’s stock was the second-biggest gainer within the S&P 500 index SPX, +0.12% behind the 8.5% run up in Danaher shares.
But despite GE’s recent surge, it was still down 26% over the past 12 months, while the Dow Jones Industrial Average DJIA, +0.23% has gained 1.5% and the S&P 500 has tacked on 0.6%.
