Takeoff. 

Boeing Co. (BA) shares recovered from concern that aircraft sales could suffer because of the U.S. withdrawal from a nuclear deal with Iran on signs that company could benefit more from shaky Iranian relations than from a small deal for wide-body 777 aircraft. 

In a Wednesday research note, Bernstein analysts Douglas Harned, Christian Laughlin and Finbar Sheehy said scrapping the Iran deal is slightly negative for Boeing and Toulouse, France-based counterpart Airbus SE, but a slight positive for defense stocks.  

Iran has orders for 110 Boeing airplanes, and another 170 Airbus jets, which in total are worth some $40 billion, Bloomberg reported Wednesday. The biggest concern from Boeing investors comes from the 65 wide-body 777s the company was expected to deliver to Iran in the future.

Boeing shares rose about 1% to $342.73 as of about 12:40 pm New York time.

Bernstein's analysts said there may be as much of a chance for Boeing to profit on an Iran fallout as not.

"For defense contractors with significant Middle Eastern exposure, heightened regional tensions could drive increased demand for missile defense, in particular, but potentially also aircraft, ships, missiles, and vehicles," Harned and company wrote.

Without the 777 deliveries to Iran, there are investors who may feel Boeing could miss its production rate of 3.5 777s per month, a critical number to hit if the company wants to keep the line going until production of the new 777x comes online in 2019, Seaport Global Securities LLC analyst Josh Sullivan explained Wednesday in an interview with TheStreet.

"It is all about utilization," Sullivan said. "If you aren't making enough of certain planes, it affects your labor rates and can impact margins. The 777 once was one of the most profitable programs for Boeing. Boeing used to build about 100 of them a year. But now if you go to 2.5 a month when you're calling for 3.5, efficiency goes through floor."

Various analysts, including Seaport's Sullivan and Bernstein's Harned, Laughlin and Sheey, were not overly concerned with Boeing falling behind on that production rate. The company has said it did not model the Iranian order into its production rate forecast for the 777 and the order was not part of its firm backlog of those jets as of April, which totaled 94. Any loss to 737 deliveries due to the Iranian deal would also be immaterial given the company had a backlog of 4,622 of those jets as of April. 

Trump could disrupt Boeing.
Trump could disrupt Boeing.
 

In a statement emailed to TheStreet, Boeing said it will consult with the U.S. government on next steps and "continue to follow the U.S. government's lead." In another emailed statement, an Airbus representative said Airbus is "carefully analyzing the announcement and will be evaluating next steps consistent with our internal policies and in full compliance with sanctions and export control regulations."

Of the two companies, Airbus could face greater hardship over the Iran deal, given that it has 95 undelivered planes bound for Iran Air in its backlog, according to Bloomberg. That includes 16 orders for its biggest A350 wide-body and 28 for its yet-to-be-delivered A330neo, the publication reported. 

As far as Boeing is concerned, however, analysts are less concerned, and investors often seem to forget one crucial thing, Seaport's Sullivan pointed out: Boeing has a major defense business of its own, and that business is doing a lot better.

In 2017, Boeing's defense unit hit $21 billion revenues, a 7% increase over the previous year. That gain was largely driven by stronger weapons deliveries. In 2017, Boeing delivered 68 new and remanufactured AH-64 Apache helicopters, 44 new and renewed CH-47 Chinook helicopters, 16 F-15 fighter jets, 23 F/A-18 Hornet jets, 19 P-8 Poseidon MPAs, and one military satellite.

And at the end of the year, the company's defense backlog was reported at $50 billion, 40% of which consists of orders from international customers. 

Sullivan admitted fears over a war with Iran, of which there are many, could provide a boost for defense contractors, including Boeing. 

In Bernstein's Wednesday note, the firm seems to agree that there is as much of a chance for Boeing to profit on an Iran fallout as not. 

"For defense contractors with significant Middle Eastern exposure, heightened regional tensions could drive increased demand for missile defense, in particular, but potentially also aircraft, ships, missiles, and vehicles," Harned and company wrote.

Action Alerts PLUS holding Raytheon Co. (RTN) is well positioned to capitalize on missile orders given it has the highest exposure to missile defense and tactical missile sales to the Middle East, Bernstein said. Lockheed Martin Corp. (LMT) also stands to benefit in this light. 

Lockheed could also benefit from boosted defense aircraft sales, as could Boeing and London-based BAE Systems plc, the firm argued. 

Finally, General Dynamics Corp. (GD) , along with Lockheed and BAE Systems, could possibly profit from heightened demand ships and other vehicles. 

Of course, if the U.S. negotiates an alternative deal that is supported by regional allies Israel and Saudi Arabia, Iran could pull back its military initiatives, and a reduction in demand for defense equipment in the Middle East could follow.

Major U.S. defense stocks rose, with Raytheon gaining 0.85% to $212.29; Lockheed rising 1% to $327.44; and General Dynamics adding 0.5% to $200.57.

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