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We expect General Dynamics Corp. (GD - Analyst Report) to beat expectations when it reports second quarter 2013 results on Jul 24.

Why a Likely Positive Surprise?

Our proven model shows that General Dynamics is likely to beat earnings because it has the right combination of two key ingredients.

Positive Zacks ESP: Expected Surprise Prediction or ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is at +0.61%. This is a meaningful and leading indicator of a likely positive earnings surprise for the shares.

Zacks Rank #3 (Hold): Note that stocks with Zacks Ranks of #1, 2 and 3 have a significantly higher chance of beating earnings. The Sell rated stocks (#4 and 5) should never be considered going into an earnings announcement.  

The combination of General Dynamics’ Zacks Rank #3 (Hold) and +0.61% ESP makes us confident of a positive earnings beat on Jul 24, 2013.

What is Driving the Better Than Expected Earnings?

General Dynamics’ revenue exposure is spread over a broad portfolio of products and services that keeps the overall growth momentum steady. With back-to-back Department of Defense contracts, the company seems to be well positioned to generate revenue. Jet sales at the Gulfstream business are continuing to see traction even in the slowing defense sales scenario. Gulfstream is expected to contribute more significantly to General Dynamics’ earnings going forward.

The company is trying to improve the value of the products it delivers and is committed towards responding to customers' changing requirements. In order to face the changing demand in some of its markets, the company recently consolidated General Dynamics Armament and Technical Products into General Dynamics Ordnance and Tactical Systems.

Other Stocks to Consider

General Dynamics is not the only firm looking up this earnings season. We also see likely earnings beats coming from these three industry peers:

The Boeing Company (BA - Analyst Report), with Earnings ESP of +1.27% and a Zacks Rank #2 (Buy).

Embraer SA (ERJ - Analyst Report), with Earnings ESP of +6.35% and a Zacks Rank #3 (Hold).

Northrop Grumman Corp. (NOC - Analyst Report), with Earnings ESP of +0.59% and a Zacks Rank #3 (Hold).

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