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Textron Inc. (TXT - Analyst Report) is set to report third quarter 2013 results on Oct 18 before the market opens. Last quarter, the company posted a 5.26% positive surprise. Let’s see how things are shaping up for this announcement.

Factors to Consider this Quarter

Textron Inc. is a global multi-industry company that manufactures aircraft, automotive engine components, and industrial tools. The company’s geographically-diverse network of aircraft, defense & intelligence, industrial and finance businesses negates any specific business risk.

Textron succeeded in beating the Zacks Consensus Estimate last quarter on the back of strong performance at Textron Systems and Industrial businesses. However, the quarterly figure came below the year-ago level by 31%, reflecting lower business jet deliveries.

However, the company, like its peers, continues to face defense budget deficits and political uncertainty. Though the company received a number of contracts this quarter, those were not sizeable. Budget cuts from sequestration have reduced the number of contracts awarded by the Department of Defense.

Again, on Oct 1, 2013, the U.S. government began a partial shutdown after the two houses of Congress, the House of Representatives and the Senate, failed to reach a consensus on a new budget and pass a budget before the start of the financial year.

In view of the current defense budget uncertainty, threat of sequestration and partial U.S. government shutdown, we remain apprehensive for the time being.

Earnings Whispers?

Our proven model does not conclusively show that Textron is likely to beat earnings this quarter. That is because a stock needs to have both a positive Zacks Earnings ESP (Expected Surprise Prediction) and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here, as you will see below.

Zacks ESP: The Zacks ESP is 0.0%.

Zacks Rank #3 (Hold): Textron Inc. carries a Zacks Rank #3 (Hold). However, the Zacks #3 Rank when combined with a 0.0% ESP makes surprise prediction difficult.

Other Stocks to Consider

Here are some other companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Lockheed Martin Corp. (LMT - Analyst Report), with Earnings ESP of +2.21% and a Zacks Rank #2 (Buy).

Northrop Grumman Corp. (NOC - Analyst Report), with Earnings ESP of +2.21% and a Zacks Rank #2 (Buy).

General Dynamics Corp. (GD - Analyst Report), with Earnings ESP of +1.80% and a Zacks Rank #3 (Hold).

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