Should Boeing Be Removed From the Dow? Mounting Issues Raise Serious Questions

Boeing, the American aerospace giant, has long been a fixture in the Dow Jones Industrial Average (DJIA), but recent struggles raise the question: does it still deserve its place among the 30 companies representing the cornerstone of the U.S. economy?

For the past five years, Boeing’s performance has fallen far short of the standards expected from companies in the blue-chip index. Bank of America aerospace analyst Ron Epstein believes Boeing no longer fits the profile of a bellwether company, saying, “They don’t check those boxes any longer.”

The Dow, established in the late 19th century, originally focused on industrial giants, but the U.S. economy has since shifted toward sectors like technology, services, and pharmaceuticals. The index’s evolution reflects these changes, with iconic industrial names like U.S. Steel replaced by companies such as Disney. Given this trend, removing Boeing, one of the last remaining manufacturers in the index, wouldn’t be a surprise.

Boeing’s Mounting Problems
Boeing’s financial troubles are significant. The company hasn’t reported an annual profit since 2018, with core operating losses of $33.3 billion over recent years. Operational challenges, including safety investigations after the 2019 737 Max crashes and a recent Alaska Airlines incident, have further tarnished its reputation. Production delays and a strained credit rating, now teetering near junk bond status, exacerbate Boeing’s woes.

In addition, Boeing’s legal battles continue. In July, the company agreed to plead guilty to charges of deceiving the Federal Aviation Administration (FAA) over the 737 Max’s design, leading to the tragic accidents that killed hundreds. As a result, the company will soon operate under the supervision of a court-appointed monitor.

Boeing’s shares have plummeted by over 60% since the second 737 Max crash and 35% since the Alaska Airlines incident. Analysts point out that if Boeing’s stock had held steady, the Dow would be approximately 1,600 points higher than its current level, suggesting that Boeing is weighing down the index.

Industry Shift and Competition
Despite its troubles, Boeing is still a major player in the U.S. economy, employing nearly 150,000 workers and contributing an estimated $79 billion in economic impact. However, analysts like Sam Stovall of CFRA Research believe there are stronger contenders for Boeing’s spot in the Dow, such as aerospace companies Lockheed Martin or GE Aerospace, which boast healthier financials and larger market caps.

Boeing’s presence in the Dow isn’t guaranteed by its longevity. General Electric, an original Dow component, was removed in 2018 after years of financial struggles. The index has shown a willingness to adapt, replacing struggling firms like ExxonMobil with tech-focused companies such as Salesforce.

While Boeing’s future remains uncertain, the question of its place in the Dow may soon come to a head. As the U.S. economy continues to evolve, so too must the makeup of its most iconic stock index.