Why The Boeing Company (NYSE: BA) Stock Will Soar to New Heights

You can be forgiven for feeling conflicted over The Boeing Company (NYSE: BA) and its stock.

On the one hand, the company has been hit by a lot of widely reported problems with its 787 Dreamliner commercial aircraft.

On the other hand, Boeing stock is up 78% this year. See the contradiction?

OK, let's sort this out.

First, the bad news. In January Boeing made headlines with reports of potential battery fires in its new flagship Dreamliner model. Other stories at the time focused on such problems as fuel leaks and a cracked windshield.

A few months later, many analysts worried about the impact of the government's sequestration-forced budget cuts on Boeing's defense-related business, and that longer-term defense budget cuts also could hurt the company.

Today, the Deamliner's engines may have an increased potential for icing, which has the Federal Aviation Administration concerned that corrections need to be made.

And yet Boeing just delivered a very impressive earnings report. Company revenue increased 11% to $22.1 billion year over year. And thanks to a 14% increase in aircraft deliveries, core earnings (excluding some pension and other costs) jumped 16%, from $1.55 a share last year to $1.80 - handily beating Wall Street expectations.

When you dig into what's really going on at this $97 billion mega-company, you will see that those numbers are just a small taste of a very bright future. The problems that got so much attention earlier this year only served to obscure a business on track to ramp up profits for years to come.

Boeing (NYSE: BA) - A Tale of Two Companies

One of the keys to understanding Boeing is that in some ways it's two different companies.

The commercial aircraft segment accounts for nearly two-thirds of its sales, with its only competition being Europe's Airbus S.A.S.

Meanwhile, Boeing's defense segment is the second-largest defense contractor for the U.S. government, just behind Lockheed Martin Corp. (NYSE: LMT).

Each segment has potential to contribute to the bottom line, though for now one is doing most of the heavy lifting.

First there's Boeing's Defense, Space and Security. Considering the gloom-and-doom talk about defense cuts and sequestration, this business segment hasn't done all that badly. It posted revenue of $8 billion for the current quarter, up 3% year over year. But earnings for the quarter dropped 19% to $673 million.

But looking ahead, Boeing's defense segment has some projects in the pipeline that could turn it into a major moneymaker...