Market Overview

Fresh Faces: GE, JCPenney Shares Revitalized By New Leadership

Fresh Faces: GE, JCPenney Shares Revitalized By New Leadership

General Electric Company (NYSE: GE) kicked off the month by deposing CEO John Flannery. By unanimous vote, Larry Culp succeeded the former chief just one year into his reign.

The following day, J C Penney Company Inc (NYSE: JCP) named Jill Soltau CEO after Marvin Ellison left in May.

GE surged up 21 percent and J.C. Penney 16 percent in the week following the transitions.

The Odds Of Outperformance

Those peaks weren’t entirely expected. A CEO change generally comes with more downside risk than upside risk, according to Investopedia. However, certain factors flip the odds.

In GE’s case, the circumstances around Culp’s rise were promising. Although the market generally favors company veterans with intimate knowledge of the operations, Culp — the first outsider in GE’s history not to have risen from within — boasts the backing of the entire board, which often inspires investor confidence.

Soltau is similarly a J.C. Penney outsider. However, she’s a 30-year veteran of the retail industry and brings experience as CEO of Jo-Ann Fabric and Craft Stores.

Not only that, but J.C. Penney had been leader-less since Ellison’s departure, and investors were impatient for a new appointment. During the transition period, the company reported a significant bottom-line miss driving a 41-percent plunge. Soltau’s appointment was a relief.

What’s Up Next

Optimism around GE’s transition may not last long. In fact, CNBC’s Jim Cramer had expected a different market reaction from the start.

"When you boot a CEO after just 13 months, the presumption is that the company's doing far worse than you think," Cramer, host of "Mad Money," told viewers. "Otherwise, why not let Flannery muddle through, right?...We learned, once again, that GE is doing far worse than we thought, that the power division is even more of a disaster, and there's no easy fix whatsoever.”

Soltau will officially start Oct. 15.

Related Links:

Morgan Stanley: A Sears Bankruptcy Could Benefit J.C. Penney

10 Most Overpaid S&P 500 CEOs

Photo credit: Miosotis Jade (Own work), via Wikimedia Commons


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