With Boeing ( BA) raising first-quarter guidance recently, the company has provided more questions than answers, making the aerospace giant's April 28 earnings release a can't miss for shareholders.

Boeing's preannouncement Thursday gives Wall Street a general idea of what the company's numbers will look like -- but Boeing didn't provide specifics as to how or why the company will top current first-quarter estimates of 44 cents a share. With brokerages awaiting the rationale for the upside surprise, new CEO Harry Stonecipher, who is at the helm of the company for his first full quarter, will take center stage, trying to repair Boeing's reputation on Wall Street.

There are two schools of thought on Boeing's outperformance. Citigroup Smith Barney's George Shapiro said Boeing's better-than-expected earnings are due to "Stonecipher's emphasis on execution." In his view, earnings may be driven by rising margins in Boeing's commercial aircraft unit or strong growth in military revenues -- especially given the strength in General Dynamics' ( GD) military revenue.

But with the March durable goods data released Friday showing that nondefense aircraft orders rose 11.7%, while defense aircraft demand fell 27.7% in March, Boeing's upside surprise could be much ado about nothing, with the company's business outlook essentially unchanged. This week, Boeing executives told investors that commercial aircraft deliveries will likely be around 285, flat with last year's level.

"The fact that the release did not address full-year estimates leads us to believe that the first-quarter surprise may partly be due to timing issues," said Byron Callan, analyst at Merrill Lynch, adding that Boeing's earnings could be as high as 60 cents a share. "In our recollection, this is the first time Boeing has issued such a release, even though there have been prior quarters when it has exceeded analysts' estimates."

On Scandals and 767s

The raised guidance could be the result of Stonecipher's increased diligence with keeping an eye on financials and providing guidance, but other questions surround Boeing's first-quarter release as well.

This week, Darleen Druyun, a former Boeing vice president, pleaded guilty to a federal conspiracy charge as part of a government investigation into Boeing's bid on a $17 billion contract to lease and sell tankers to the Pentagon. At the heart of the case, which is still being investigated, is the question of whether the company improperly influenced a government official with a job offer to win the contract.

In November, Boeing fired former CFO Michael Sears and Druyun for unethical behavior, leading to the resignation of CEO Phil Condit and an outcry on Capitol Hill. According to Boeing, Sears violated company policy by discussing job offers with Druyun when she was still a procurement officer for the Air Force, overseeing billions of dollars in Boeing contracts.

The Druyun matter has sullied Boeing's once-stellar reputation on Wall Street and in Washington, D.C., forcing Stonecipher to make weekly pilgrimages to perform damage control. Boeing relies heavily on government spending, generating more than half of its revenue in 2003 from defense contracts -- some of which have been canceled, delayed or frozen as politicians rediscover fiscal frugality.

Specifically, investors should be looking for comments on the company's $17 billion deal to turn 767 aircraft into refueling tankers, which is currently under review by the Department of Defense and appears to be in limbo.

"We're skeptical of Boeing's chances of securing a 767 tanker order after DOD's final study on the proposed program are completed in May," said Cal von Rumohr, defense analyst for SG Cowen, citing "the ongoing taint" of Druyen's guilty plea.

Other brokerages, like Goldman Sachs, believe that Boeing will keep the 767 deal, but recent news hasn't been so favorable for Boeing. Two weeks ago, the Pentagon's inspector general said Boeing may have overcharged the government by $4.5 billion, recommending the government make changes to Boeing's contract.

If the tanker contract comes open again, Airbus will provide stiff competition -- the company has been winning tanker contracts lately. Last week, Airbus announced a $1.5 billion deal to provide the Australian government with tankers, three months after winning a $24 billion, 27-year contract to provide tankers to the British government.

The loss of the tanker deal would be the latest setback in Boeing's relationship with the Pentagon, which ended the 20-year-old Comanche attack helicopter program in February. It would also cause a definite hit to Boeing's bottom line.

"Boeing has clearly indicated in its SEC filings that it may be required to take a charge of about $300 million ... were the program not to proceed according to plan," said Campbell. "If guidance were to be revised to assume the 767 program was not proceeding, free cash-flow guidance could be lowered by about $300 million."

Ultimately, the 767 contract and the political implications therein will be a big test of Stonecipher's leadership and how Wall Street views the company -- only four analysts rate it a buy, while 13 others have it at hold or worse. Jeff Pittsburg, analyst at Pittsburg Research, believes he's up to the challenge.

"Stonecipher's the straight shooter in the crowd," he said. "I think he's doing a great job with damage control, and this too shall pass. Remember, if they go buy from Airbus they have to pay a higher price, because of the currency affect.

A Good Defense Is Boeing's Best Offense

Defense contracts are becoming even more important now that Boeing is no longer the industry leader in commercial aircraft, losing market share to rival Airbus, a unit of EADS.

Boeing lost its claim as the No. 1 commercial aircraft maker in 2003 and is increasingly reliant on sales of two aircraft -- the 737 used by low-cost carriers like Southwest Airlines ( LUV) and the widebody 777 used in international routes -- as it waits for its next-generation 7E7 Dreamliner to roll out of factories in 2008.

With the U.S. aviation industry expected to lose $1.5 billion in 2004 following a more-than-$3 billion loss in 2003, the commercial aviation business is slumping. In the first quarter, airlines ordered just 45 planes vs. 70 a year ago. And concerns are rising that a recovery in commercial aviation won't boost demand for planes -- a recent study from Aviation Daily and Eclat Consulting said that low-cost carriers, who have been buying more aircraft, hurt demand by weakening the balance sheets of rivals.

"We believe that the low-cost carriers cripple their higher-cost legacy competitors' demand for future aircraft than they increase aircraft demand for themselves," said Jim Higgins, analyst at Credit Suisse First Boston. "There will be a more protracted and muted recovery in new aircraft demand than most investors expect."

As Boeing focuses on the fuel-efficient 7E7 Dreamliner for future growth, it will begin spending more money on research and development at a time when demand in the U.S. could be limited for its products. (Boeing still doesn't have a U.S. launch partner for the 7E7.) Meanwhile, Airbus has become more competitive, targeting low-cost and international operators to fuel growth, securing commitments to supply Spirit Airlines and Virgin's U.S. operation with planes.

It's How You Look at It

By next Wednesday, the mystery around Boeing's first-quarter upside surprise will be solved, which could also answer some of the questions about Boeing's uncertain future. A first quarter fueled by strong, sustainable business trends will bode well for shares, but a timing-related upside surprise will fail to engender goodwill -- and could hurt second-quarter earnings, too.

Ultimately, until visibility clears up and investors are convinced that Boeing is back on track -- a process that Stonecipher will likely continue in this earnings release -- shares will probably be stuck in place.

"Earnings are going to be fine. I don't think it's an earnings issue. It's a perception issue," said Pittsburg. "The stock is in a trading range until everything clears."