Sterne, Agee previews defense earnings

Those defense contractors with heavy backlogs should fare best amid the government shutdown and 2014 sequester, says Sterne, Agee, which cuts estimates on KEYW Holding (KEYW -0.8%) due to its thin order book.

Lockheed Martin (LMT -0.5%) - on the other hand - rates a hike in estimates thanks to its relatively large backlog. Look for budget scenarios and capital deployment plans to dominate the Q3 earnings call.

The Q3 EPS estimate for General Dynamics (GD -1%) of $1.71 is $0.04 higher than consensus, with the team expecting management to reiterate its call for deploying 100% of free cash flow into buybacks and dividends.

Raytheon (RTN -1.1%) estimates are about inline with consensus, supported by backlogs, international deliveries, and capital returns.

Military backlogs have held up better than expected, says the team, which should held FLIR Systems (FLIR -0.8%) to a solid quarter.

Harris (HRS -0.6%) won't get another big pickup in orders like it saw last year at this time, and Sterne's EPS estimate is $0.02 below the $1.13 consensus.

Mercury Systems' (MRCY -2.2%) EPS is estimated to be a loss of $0.10, $0.02 lower than the Street - reflecting continued order delays in several key programs.

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