Wiktor Wise
General Electric (GE) was the last original member of the Dow Jones Industrial Average (DJIA) when it was removed in June 2018. GE had a volatile history with the DJIA, being removed twice in its early days and returning twice before being a mainstay for over a century. GE's poor performance and financial instability led to its removal, as it no longer represented the overall large-cap market. It was replaced by Walgreens Boots Alliance, a drugstore chain with a more stable stock price.
| Characteristics | Values |
|---|---|
| Company that replaced General Electric on the DJIA | Walgreens Boots Alliance |
| Date of replacement | 26 June 2018 |
| Reason for replacement | GE's poor performance, financial instability, and loss of market capitalization |
| Walgreens Boots Alliance's stock price | Approximately $68 |
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What You'll Learn
General Electric's poor performance
General Electric (GE) was removed from the Dow Jones Industrial Average (DJIA) in 2018 due to years of poor performance and declining revenues. GE had been a component of the DJIA since 1907 and was the last remaining original member of the index, which was introduced in 1896.
GE's removal from the DJIA was a significant milestone, as the company had been at the centre of American capitalism for over a century. GE was born out of the race to provide affordable light and electricity, and it quickly became a household name, manufacturing everything from light bulbs to jet engines. However, by the time GE commemorated its 125th anniversary in 2017, the company was struggling. In January of that year, GE announced it would cut 12,000 jobs, and the stock fell 45% over the course of the year.
GE's poor performance has been attributed to several factors. One factor is poor decision-making about mergers and acquisitions, which has contributed to a cash crunch. For example, in 2015, GE acquired Alstom's power business for $9.5 billion, making it the company's biggest-ever industrial purchase. This deal represented a doubling down on fossil fuels, even as renewable sources of energy were gaining popularity. As a result, GE's power business is now in shambles.
Another factor contributing to GE's poor performance is the company's complexity and reliance on financial services for growth. GE's intricate web of businesses and global reach became liabilities in a rapidly changing market, with technological disruption, financial crises, and evolving market dynamics. Additionally, GE's dividend cuts in 2009 and 2010 damaged its image as a blue-chip stock and drove away long-term investors.
Overall, GE's removal from the DJIA was a result of its declining performance and revenues, which were caused by a combination of poor decision-making, market changes, and damage to its reputation.
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Walgreens Boots Alliance as a replacement
Walgreens Boots Alliance replaced General Electric on the Dow Jones Industrial Average (DJIA) in 2018. General Electric was the last original member of the DJIA, which was introduced in 1896. Over the years, the index has evolved to become more diverse, and the relative importance of industrial companies has decreased.
Walgreens Boots Alliance is an American multinational holding company that was formed on December 31, 2014, after Walgreens acquired the remaining 55% stake in Alliance Boots. The company is headquartered in Deerfield, Illinois, and ranked #18 on the Fortune 500 rankings of the largest US corporations by total revenue in 2022.
Walgreens Boots Alliance operates as a drugstore chain, offering prescription and non-prescription drugs, as well as related health and wellness services and general goods. With its addition to the DJIA, the index became more representative of the consumer and healthcare sectors of the US economy.
The decision to replace General Electric with Walgreens Boots Alliance was influenced by the former's declining performance. In 2018, General Electric's stock had plunged by nearly 80% from its 2000 highs, and its market capitalization was much larger than that of Walgreens Boots Alliance, at over $110 billion compared to about $64 billion. Additionally, General Electric's shares had fallen 55% in the previous year, while the Dow had gained 15%.
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GE's history with the DJIA
General Electric (GE) was one of the original Dow stocks when the index was created in 1896. GE was formed as an electricity company in 1892 through a merger that included a business owned by Thomas Edison, the inventor of the lightbulb. GE was the modern-day equivalent of a technology stock when the Dow was heavily focused on growth industries such as railroads.
GE has had a volatile history with the Dow Jones Industrial Average (DJIA). It was removed from the Dow twice in the index's early days—it was dropped from the index in 1898 before rejoining in 1899. GE was the longest-running DJIA component, lasting 122 years. In that time, GE grew into a multinational giant with several businesses, including power, oil and gas, aviation, and transportation.
In April 2015, GE began selling most of its GE Capital assets to create a slimmer company. By 2018, GE's stock had plunged by nearly 80% from its 2000 highs, and it accounted for less than 1% of the Dow's weight. GE was replaced by Walgreens Boots Alliance in June 2018. This decision was viewed as a blow to GE, which had been struggling in recent years. GE's removal from the Dow marked a milestone as it was the last remaining original member of the index.
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The Dow's evolution
The Dow Jones Industrial Average (DJIA), Dow Jones, or simply the Dow, is a stock market index of 30 prominent companies listed on stock exchanges in the United States. It is one of the oldest and most commonly followed equity indices. The DJIA is price-weighted, meaning that a stock's price, rather than the size of the company, determines its relative importance in the index.
The DJIA has changed its components dozens of times since its inception in May 1896. The first change occurred just three months after it was founded, and several companies have come and gone over the years. The index is now more diverse than the original list of industrial companies.
General Electric (GE) was one of the original Dow stocks when the index was created in 1896. GE was the last-standing member of the 1896 Dow. It has had a volatile history with the DJIA, having been removed from the Dow twice in the index's early days—it was dropped from the index in 1898 and 1901 before rejoining the Dow the following years. After being a mainstay for more than a century, GE was replaced by Walgreens Boots Alliance in June 2018. GE had become a poor representative of the overall large-cap market and had little influence on the index. Its share price had plunged by nearly 80% from its 2000 highs, and it accounted for less than 1% of the Dow's weight.
Other notable changes to the DJIA include the addition of Apple Inc. in March 2015, replacing AT&T, and the replacement of United Technologies by Raytheon Technologies in 2020. Nvidia replaced Intel, and Sherwin-Williams replaced Dow Inc. in November 2024.
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GE's future
General Electric (GE) was replaced by Walgreens Boots Alliance in the Dow Jones Industrial Average (DJIA) in June 2018. GE had been a component of the DJIA since November 1907 and was the last remaining original member of the index, which was introduced in 1896.
However, there are also some challenges and uncertainties facing GE. There have been negatives in the aviation and renewable energy segments, with supply chain issues impacting GE Aviation's military business. A long-term extension of production tax credits (PTC) could also create near-term uncertainty and affect GE's orders and cash flow outlook. Additionally, there is significant uncertainty over GE's long-term 10-year outlook, with the company's stock currently trading slightly below the lowest target price.
Overall, while GE faces some near-term challenges, there are also positive signs in its power and healthcare segments, and its commitment to sustainability and decarbonization could position it for long-term growth. However, the company's future remains uncertain, and its performance in the coming years will be crucial in shaping its prospects.
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Frequently asked questions
Walgreens Boots Alliance replaced General Electric on the DJIA in June 2018.
General Electric was replaced because it had become a poor representative of the overall large-cap market and had little influence on the index. The company was also going through a restructuring that included the loss of its finance division and the sale of its railroad business.
The Dow Jones Industrial Average (DJIA), also known as the Dow Jones or the Dow, is a stock market index of 30 prominent companies listed on stock exchanges in the United States. It is one of the oldest and most commonly followed equity indices.
