'Tis the season for earnings news, and time for the nation's defense contractors to report on fiscal Q3. We've already heard from United Technologies (NYSE:UTX) and Textron (NYSE:TXT). Next up is General Dynamics (NYSE:GD), which reports tomorrow. Here's what to expect.

What analysts say:

  • Buy, sell, or waffle? Eighteen analysts give General D 11 buy ratings and seven holds.
  • Revenue. On average, they expect to see sales increase 8% to $7.4 billion.
  • Earnings. Profits are predicted to rise 13% to $1.51 per share.

What management says:
General D has been so busy these past few months, I honestly don't know where to start. In August, the company laid out more than $2.2 billion to expand its business-jet-servicing business with the acquisition of Swiss Jet Aviation. (According to my fellow Fool Alex Dumortier, this deal puts the General on the right side of a trend of consumers avoiding lower-ranked major airlines like United (NASDAQ:UAUA), US Airways (NYSE:LCC), and Delta (NYSE:DAL).) But the General's also been active in its "home base," the defense sector -- delivering ships to the Navy ahead of schedule, stealing a march on rival armored-vehicle manufacturers, and on and on.

What management does:
And speaking of "on and on," the company's margin improvements make the Energizer Bunny look like a slacker. They just keep going, and going, and going ... up.

Margins

4/07

7/07

9/07

12/07

3/08

6/08

Operating

10.9%

11.1%

11.2%

11.4%

11.8%

12.1%

Net

7.7%

7%

7.2%

7.6%

7.9%

8.2%

All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
Meanwhile, the price is headed the other way. General D currently trades for less than 10 times trailing earnings -- and less than eight times free cash flow!

Now, I know that defense investors are getting into a bit of a funk lately, worrying over slimming defense budgets, rising pension costs, and the like. But honestly, folks, this valuation is starting to look well and truly ridiculous. This General's getting priced like a buck private. My advice: Draft it into your portfolio before the Street comes to its senses.

The best defense is further Foolishness:

Fool contributor Rich Smith does not own shares of any company named above. The Motley Fool has a disclosure policy.