ADP - General Electric leads Q1 gains among big-cap industrials with 46% jump

2023-03-31 17:21:09 ET

General Electric’s ( GE ) stock jumped 46% in the first quarter of 2023, the best performance among the most widely held large-cap industrial companies.

The Industrial Select Sector SPDR ETF ( NYSEARCA: XLI ), whose holdings include the biggest U.S. companies in the manufacturing sector, advanced by 3% for three months ended today.

The Standard & Poor’s 500 stock index rose 7% during the period, while the Dow Jones Industrial Average ( DJI ) edged upward by 0.4%. The tech-heavy Nasdaq Composite ( COMP.IND ) surged 17% to beat the Dow average by the most since 2001.

The year-to-date gains came amid a tumultuous period in the banking sector. Silicon Valley Bank and Signature Bank collapsed, and the biggest U.S. banks rushed to save First Republic Bank from failing. UBS Group acquired rival Credit Suisse as it teetered on the edge of collapse.

GE ( GE ) gained as the industrial conglomerate began the year by spinning off GE Healthcare Technologies ( GEHC ) into a separate publicly traded company. The spinoff was the first step in its multiyear plan to split into three companies. GE ( GE ) gained as its earnings climbed on stronger demand for jet engines and power turbines.

Boeing ( NYSE: BA ) also benefited from rebounding demand for aircraft, rising more than 11% during Q1. The gain wasn’t pronounced its jump during the second half of last year, when the company resumed deliveries of the 787 Dreamliner and reported positive cash flow.

A key concern going into the second quarter is whether the rocky period for regional banks will limit lending for non-residential construction and negatively affect demand for manufactured goods.

Those concerns may help to explain Caterpillar's ( NYSE: CAT ) 4.5% decline in the past three months. The maker of heavy machinery and construction  equipment missed earnings estimates because of foreign exhange moves in Q4 2022. Caterpillar ( CAT ) last month was downgraded to Neutral by analysts at Baird.

Deere ( NYSE: DE ) declined by 3.7% during the first quarter amid concerns about the macroeconomy.

Analysts at Daiwa this week rated Deere's ( DE ) stock as an Outperform with a price target of $440 a share, saying the maker of farm machinery is poised to benefit in the longer term from the digitization of agriculture.

"Deere ( DE ) stock is currently offering a 7% free cash flow yield and trading at 13x forward 12-month EPS, which, in our view, already reflects a mild recession," according to Daiwa. "Given the dynamic economic environment, we expect to see some volatility in Deere stock and would recommend being tactical in adding to positions."

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