"Which came first, the chicken or the egg?" This philosophical chestnut is more than academic for investors attempting to read the entrails at Boeing (NYSE: BA).

Last month, Boeing announced it was upping the production rate on its 737 Next-Gen airliner. A Fool could have guessed then that there was more to this news, than just Boeing's vague optimism that big 737 customers in the airline industry "will return to profitability in 2011," giving rise to "an increased demand for airplanes -- especially in the market served by the Next-Generation 737." The 8% hike in Boeing's 2012 production rate seemed to foreshadow specific, as-yet unannounced new contract wins for the aerospace giant -- the plane-production chicken, preceding the contractual egg.

And as it turned out, this is just what happened. Three weeks after Boeing announced its stepped-up rate of production, it confirmed the existence of a buyer for many of these new planes: Russia. Specifically, Russian airline holding company Rosavia, which chose Boeing over Airbus to sell it "50 … aircraft to be delivered between 2010 and 2016, plus an option for 15 more," plus the possibility of as many as 55 more plane orders being placed through 2020. Taken altogether, that's enough new planes to sop up four years' worth of Boeing's incremental accelerated production.

Seeing 20/20
"But hold up a sec," you say. Running from 2010 to 2020, the Rosavia contract stretches 10 years, eight of which run concurrently with Boeing's accelerated schedule. Who's buying the other, extra planes? The answer to this question, I suspect, is the next chicken, flying home to roost. Who indeed will be buying all these new planes?

Could optimism about the U.S. airline industry account for the whole increase? Perhaps. From giants like AMR (NYSE: AMR) and Delta (NYSE: DAL), to upstart-growing-up-quick Southwest (NYSE: LUV), American airlines by and large posted largely modest revenue gains in their most recent quarters.


Recent Year-Over-Year Revenue Gain







Source: CapitalIQ, a division of Standard & Poor's.

But to my Foolish eye, it's the international picture that holds the most promise for Boeing. Corollary to the Rosavia deal, we've heard Russian flag carrier Aeroflot has a tender for as many as 65 Boeings after musing it’d be open at a purchase, at the right price. And the real elephant in the room, of course, is the long-running negotiation over Ryanair's (Nasdaq: RYAAY) hoped-for 200-plane purchase.

Mass production lines in the chicken coop
Recent news reports tell us that Ryanair's ever-quotable CEO is playing as hard a game of ball as ever in negotiating the purchase. But confirmation over the weekend that negotiations are still alive reminds us that as recently as November, Ryanair was insisting there was only "a very small amount of money" at issue. On the one hand, Ryanair expressed frustration with Boeing's intransigence -- but on the other, Ryanair's downplaying of the sums involved suggests the deal will eventually go through.

And in that regard, we may have seen our next chicken arrive in the coop just yesterday. Less than a month after announcing its increase in 737 production rates from 31.5 planes per month to 34, Boeing upped the number once again, this time to 35.

Rise 'n' shine, roosters
As before, Boeing explained its early announcement as intended to give suppliers like 737 suppliers like General Electric (NYSE: GE) and United Tech (NYSE: UTX) plenty of time to prepare to "service" Boeing's egg production. But bird-watching Fools may also interpret this latest announcement as presaging news nearly as good as what we received earlier this month.

My guess: Mama Boeing's getting ready to lay a new egg. And while we don't yet know whether it will grow into a rooster or a hen, I suspect Mama Boeing's already picked out a name: "Ryan."

Foolish final thought
There is, however, a denouement to this story. All the good news about production expansion and new contracts may set Boeing investors to drooling over the prospects for profits (and perhaps, omelets?)

And personally, I agree, as business appears to be going gangbusters for Boeing. That's not to say, however, that the stock's price is necessarily right. Despite having fallen 10% from its April highs, Boeing's trailing 39 P/E and forward P/E of around 14 still seems stretched in light of analysts' projected sub-10% growth rate going forward. And while there are good arguments for why the stock's P/E doesn't accurately measure its value, there are good arguments to the contrary as well.

My advice: Cheer Boeing's success all you want. Watch the eggs roll in, and pass around the cigars. Just don't go counting those profits, till they've hatched.

Spirit AeroSystems Holdings is a Motley Fool Hidden Gems pick, but Fool contributor Rich Smith does not own shares of any company named above. The Motley Fool has a disclosure policy.