New York: General Electric Co. suffered a crowning ignominy on Tuesday as overseers of the Dow Jones Industrial Average kicked the beleaguered company out of the stock gauge it has inhabited for more than a century.
Once the world’s most valuable company, GE will be replaced by Walgreens Boots Alliance Inc., the Deerfield, Illinois-based drugstore chain created in a 2014 merger. The change will take effect prior to the open of trading next Tuesday. Down 26%, GE is the worst performer in the Dow in 2018, as it was last year, as well.
“It was an issue not of if, but when,” said Quincy Krosby, the chief market strategist at Prudential Financial Inc. “The GE that was dominant in the Dow in the ’70s and ’80s is no longer the same GE.”
The change means the last original Dow member has finally been removed from the benchmark formed in 1896, with GE joining the likes of Distilling & Cattle Feeding, National Lead, Tennessee Coal & Iron and US Rubber. GE briefly left the index, but has been in it continuously since 1907.
“Since then the US economy has changed: consumer, finance, healthcare and technology companies are more prominent today and the relative importance of industrial companies is less,” said David Blitzer, managing director and chairman of the index committee at S&P Dow Jones Indices.
GE has also changed. It’s lost almost $140 billion of market value in the last year, spurring a plan to shed $20 billion of assets in a bid to realign businesses and cut costs as the company grapples with debt challenges and flagging demand. Chief executive officer John Flannery, who took over for Jeffrey Immelt last year, said in May there is no “quick fix” to the company’s problems.
In Walgreens, the Dow gets something less than an investor darling. The stock fell in both 2016 and 2017 and is down another 11% since December.