Ford Shares Tank and Boeing To Release Short List For 777X Production

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The Dow Jones Industrial Average (DJINDICES: ^DJI  )  was up 175 points just before 3 p.m. after the Federal Open Market Committee announced it would cut $10 billion from its $85 billion monthly bond-buying program aimed at stimulating the economy.

The drop to $75 billion per month will occur in January. But the central bank said it would not yet act to increase a short-term interest rate that is now close to zero.

Some observers had worried that tapering of the quantitative-easing bond purchases would push the market down, but the three major U.S. indices were all up on the news.

Regardless of the Fed's announcement, long-term investors should take any short-term volatility from interest-rate decisions with a grain of salt. Ultimately, tapering is a good thing and means our economy is stronger -- even if short-term traders head to the exit.

In other news, some big-time industrial companies are making big headlines today. Here are the details.

Outside of the Dow Jones, shares of Ford (NYSE: F  ) are down roughly 7%. This comes after the company offered an updated guidance for lower operating margin and lower pre-tax profits in 2014.

Sounds ugly, right? Not so fast.

Ford will be unleashing its 2015 Mustang and F-150 next year. Photo credit: Ford

Ford is undertaking the most aggressive product launch schedule in company history next year. It plans to roll out 23 new or drastically refreshed vehicles globally, which is more than double 2013's 11 vehicle launches.These launches don't just happen at the snap of a finger; there are costs for converting plants to produce different parts and designs, more advertising expenses, and a plethora of other variables that put pressure on margins and profitability. Long-term investors should see this as a necessary bump in the road for a more profitable period after 2014.

Let's put another number in better perspective. Ford expects its 2013 pre-tax earnings to come in at about $8.5 billion, which is one of the automaker's best performances in history. So what's the profitability dip expected in next year's results that initiated this sell-off? Ford's guidance for 2014 pre-tax earnings is between $7 billion and $8 billion, which isn't a world-ending decline.

I even expect Ford to come in at the high end of that projection based on the success of its highest-selling volume vehicle, and its most profitable, the F-Series. Sales of Ford's full-size pickups are up nearly 20% this year even as competitors have fresher designs on the market. Ford will unveil its next-generation F-150 in 2014, which could send sales, market share, and profits surging.

Boeing (NYSE: BA  ) is a loser inside the Dow today, trading 0.66% lower.

Boeing has had one heck of a week, announcing that it would increase its quarterly dividend 50% to $0.73 per share. It also named Dennis Muilenburg as Boeing's vice chairman, president, and chief operating officer; he will join the corporate team in Chicago, sharing day-to-day business operations with CEO Jim McNerney.

On top of those two events, Boeing announced it is narrowing its list of sites for the highly anticipated 777X production that has roughly 22 states jumping over each other to win. The aviation juggernaut plans to slash the list to a few top picks by the end of the week. Boeing had previously offered a contract to the machinists union that would guarantee 777X production of its Everett, Wash., plant, but that offer was soundly rejected by a two-thirds vote in November.

This will be an important decision for investors, as Boeing's workforce at Everett is very experienced with production of the 777X's predecessor airplane. If Boeing opts to play hardball and take production elsewhere, it could face a less-experienced workforce that could lead to production problems, budget overruns, and delays -- which is a must-avoid situation after such problems popped up with its 787 Dreamliner production.

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  • Report this Comment On December 18, 2013, at 3:22 PM, Kent wrote:

    Boeing extorted the machinists and lost that vote to freeze workers pay for 8 years. Now they will punish their 50 year loyal workers by taking their wing somewhere else. It would serve Boeing right if the plants in Seattle get the new work from Airbus and don't need Boeing. Boeing can suffer from inexperienced workers and learning curve slow down.

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Related Tickers

9/29/2016 1:08 PM
^DJI $18173.99 Down -165.25 -0.90%
BA $131.08 Down -1.15 -0.87%
Boeing CAPS Rating: ****
F $11.98 Down -0.11 -0.91%
Ford CAPS Rating: ****