Will Boeing Earnings Benefit From Delta and United Continental's Renaissance?

Boeing (BA 0.72%) will release its quarterly report on Wednesday, and the Dow component has soared to new all-time record highs as conditions in the commercial aircraft sector have never been better. Part of that success has to do with the sudden profitability of Delta Air Lines (DAL +1.46%) and United Continental Holdings (UAL +2.80%), both of which have gone from difficult times just a few years ago to massive profitability. Will the two airlines' recoveries lead to even better results for Boeing earnings in the future?

Much of the news about Boeing during 2013 has focused on its 787 Dreamliner launch, which has been plagued by difficulties. The 787's grounding earlier this year created huge uncertainty about the viability about the aircraft. Lately, though, investors have simply ignored further problems with the Dreamliner, assuming that they'll all work themselves out and fade in importance over time. Given the huge long-term prospects Boeing has to reap orders in a wide variety of existing and new plane designs, investors might well be smart to look beyond momentary troubles. Let's take an early look at what's been happening with Boeing over the past quarter and what we're likely to see in its report.

Stats on Boeing

Source: Yahoo! Finance.

How high can Boeing earnings fly?
In recent months, analysts have had mixed views on Boeing earnings, reducing their third-quarter estimates by $0.02 per share but raising full-year 2013 and 2014 projections by $0.02-$0.04 per share. The stock has soared higher over the period, gaining 14% since mid-July.

The most encouraging thing for Boeing is that its stock has gained despite ongoing concerns about the Dreamliner. Less than a month ago, Norwegian Air decided to ground one of its Dreamliners after flying for only a few weeks, citing a track record of only 49% success in on-time departures in requiring Boeing to fix the aircraft's problems. More recently, systems malfunctions caused two Japan Airlines Dreamliner flights to return to their departure cities, which some analysts argue led to the airline choosing Airbus for a new order despite having a long-term relationship with Boeing. Yet through all of this, the stock has only climbed higher.

As many investors are finally realizing, the Dreamliner isn't really the key to Boeing's success. The 737 MAX promises to greatly increase the fuel efficiency of one of the company's most popular aircraft designs, and United Continental was one of the early airlines to order the new model last year. Delta Air Lines said earlier this year that it would wait to see how the new 737 MAX performed before considering orders, but the carrier has the option to convert some of its existing order for 737-900 aircraft to the 737 MAX instead if it likes what it sees.

Still, new aircraft coming in means old aircraft going out, and Boeing has had to shift its focus in light of its innovations. Just last week, the company said it would cut the production rate of its 747-8 jumbo jet by 14% through 2015, citing weak demand for the model. Between the larger Airbus A380 and Boeing's own slightly smaller 777 aircraft, which both United Continental and Delta fly, the 747 could well prove to be a long-term casualty for Boeing.

The key to Boeing's success remains healthy airlines. Delta Air Lines plans to cut costs by $300 million by modernizing its fleet to include updated Boeing products. One reason why United Continental has lagged behind Delta is that it has been slower to restructure its domestic fleet, pressuring its margins more than Delta's.

In the Boeing earnings report, watch to see how the company responds to the latest Dreamliner issues. By emphasizing its successes, Boeing should be able to keep investors squarely focused on the big picture, which continues to look bright for the company decades into the future.

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