With third-quarter earnings season off to a strong start, the Dow Jones Industrial Average ($DOWI) kicked off today's session by setting a new record high of 43,240, and is now up more than 13% on a year-to-date basis.
While the Dow hasn't gained as big as the broader S&P 500 Index ($SPX), which is up 21.8% in 2024, it's fair to say that the Dow has been moving impressively higher this year despite some pretty serious dead weight among its 30-stock lineup.
Three notable laggards, Intel (INTC), Boeing (BA), and Nike (NKE), have significantly underperformed the index and their fellow Dow components, with steep double-digit losses that have raised questions about their future within the prestigious Dow Jones - which just earlier this year replaced notable laggard Walgreens Boots Alliance (WBA) with Amazon.com (AMZN).
From technological transitions, to engineering and labor concerns, to shifting consumer preferences, each of these companies is grappling with unique challenges that have pressured their share prices and led to their status as the Dow's worst performers of 2024. Here's a closer look at these three Dow laggards and their deep declines.
#1. Intel Corporation
Intel Corporation (INTC), a pioneer in the semiconductor industry, has faced serious challenges amid its attempted pivot to a foundry. The company, known for its processors and chipsets, reported disappointing Q2 earnings in early August. Revenue of $12.83 billion was down 1% year-over-year, and adjusted earnings per share of $0.02 arrived well below the anticipated $0.10.
CEO Pat Gelsinger acknowledged the disappointing performance, citing "gross margin headwinds from the accelerated ramp of our AI PC product" and "higher than typical charges related to non-core businesses," with the need for decisive actions to improve efficiency. One of those decisive actions was a dividend suspension, along with workforce cuts, and the company is also eyeing the spinoff of its foundry business.
INTC stock has rallied back more than 22% from its 2024 lows, set in early September - but is still down by nearly 55% for the calendar year, easily the worst performance on the Dow.
On the plus side, at a forward price/sales ratio of 1.91, INTC stock looks reasonably cheap at current levels - based on both the tech sector median, and its own historical valuations.
Looking ahead, Intel's Q3 2024 guidance projects revenue between $12.5 billion and $13.5 billion, with an adjusted per-share loss of $0.03. The company aims to reduce operating expenses to approximately $20 billion in 2024 and $17.5 billion in 2025.
Analysts maintain a cautious outlook on INTC. While the mean target price of $29.36 represents a 29.6% upside, the consensus rating among 36 analysts is a "Hold."
#2. The Boeing Company
Boeing Company (BA), a global aerospace leader, designs and manufactures commercial jetliners, defense products, and space systems. Despite its virtual duopoly in the industry, the company has lost significant money on fixed-price government contracts, which are a primary source of revenue.
BA stock is down 41% on a YTD basis, making it the second-worst performer among the Dow industrials.
The company's Q2 2024 earnings report, released on July 31, fell short of expectations. Revenue declined 14.6% year-over-year to $16.87 billion, below the anticipated $17.35 billion. Boeing reported a core loss per share of $2.90, significantly wider than the expected loss of $1.00.
After starting the year with significant safety questions raised by the blowout of a 737 MAX door plug, the company is now grappling with a strike involving 33,000 machinist workers, which has entered its fifth week. This labor dispute is estimated to cost Boeing more than $1 billion per month, severely impacting its already precarious financial situation. The strike has forced Boeing to halt production of its popular 737 MAX, as well as the 767 and 777 models.
Now, amid reports that the company's credit rating could be downgraded, Boeing is looking to raise up to $25 billion to shore up its balance sheet.
Analysts remain doggedly optimistic when it comes to Boeing, which is set to report its next quarterly earnings on Wednesday, Oct. 23. The consensus among 24 analysts in coverage is a "Moderate Buy," with the mean target price of $206.33 suggesting a potential upside of 35.4%.
#3. Nike Inc.
Nike Inc. (NKE), a global leader in athletic footwear and apparel, has been a stalwart in the sports industry for decades. Known for its innovative designs and marketing prowess, Nike has maintained a consistent dividend policy, with over 20 consecutive years of increases, and currently offers a yield of 1.81%.
NKE has shed more than 24% of its value in 2024, and a single-day stock plunge of 20% after earnings on June 28 erased $28 billion from Nike's market capitalization.
Nike has struggled amid an unsuccessful direct-to-consumer sales pivot, and has lost market share to competitors such as On Running (ONON) and Hoka - owned by Deckers Outdoor (DECK) - along the way, which have gained traction with innovative designs and fresh product lines. Weakness in China's economy, a key market, has also played a role.
Nike's fiscal 2025 Q1 earnings report, released on Oct. 1, 2024, revealed mixed results. While earnings per share of $0.70 surpassed analysts' estimates, revenue fell short at $11.59 billion, marking a 10.4% year-over-year decline. The company faced headwinds across all geographical regions, with Nike brand digital sales plummeting 20% and Nike Direct revenue dropping 13%.
In a significant move, Nike announced the return of Elliott Hill as CEO in September 2024, replacing John Donahoe. This leadership change was well-received by investors, as the company hopes this transition will help address recent challenges, particularly its struggles in the Chinese market and increasing competition from both established and emerging brands.
CEO Hill acknowledged the difficulties, stating, "A comeback at this scale takes time, but we see early wins—from momentum in key sports to accelerating our pace of newness and innovation."
Looking ahead, Nike has postponed its investor day and withheld updated guidance, citing the ongoing CEO transition. The company's next earnings release is scheduled for Dec. 19.
Analysts have a mean target price of $87.75 for NKE, indicating a potential upside of 7.5% from its current price. The consensus among 31 analysts is a "Moderate Buy."
The Bottom Line on These Dow Stocks
The struggles of Intel, Boeing, and Nike in 2024 raises questions about their future in the Dow Jones index, as these stocks continue to lag significantly. As these companies navigate their unique challenges, their ability to adapt and recover remains unproven, so the coming months will be crucial in regaining the confidence of investors. While there are still some undervalued bargain stocks worth buying in this market, it's likely too early to scoop up these Dow underperformers just yet.
On the date of publication, Ebube Jones did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
