Dj Ceo Demarco Buys 9500 Of Kratos Defense & Security Solutions Inc >Ktos

Kratos Defense & Security Solutions, Inc. KTOS recently delivered mixed fourth-quarter 2024 results. While the bottom line surpassed the Zacks Consensus Estimate, the top line missed the same. However, both metrics improved on a year-over-year basis.

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The year-over-year improvement can be attributed to solid revenue growth from its Turbine Technologies, C5ISR, Defense Rocket Support and Microwave Products businesses, along with increased sales of its target drones. The company’s cash and cash equivalents as of Dec. 31, 2024, totaled $329.3 million, which improved significantly from the year-ago figure of $72.8 million.

Such impressive operational results might encourage investors to rush to buy this stock. However, a prudent investor knows that a significant decision like buying a stock should not depend on a company’s single quarterly performance alone. Instead, one should be mindful of its performance over the past year in terms of share price return, long-term prospects as well as risks (if any) to investing in it. We have provided a detailed discussion on this, as one can see below.

KTOS Stock Beats Industry, Sector & S&P500

Kratos Defense’s shares have surged 36.1% over the past year, outperforming the Zacks aerospace-defense equipment industry’s gain of 22.5%. The stock has also surpassed the broader Zacks Aerospace sector’s return of 1.5% as well as the S&P 500’s gain of 18.5% in the said time frame.

A similar stellar performance can be witnessed in the share price return of other industry players like Curtiss-Wright Corporation CW, Teledyne Technologies TDY and Heico Corp. HEI over the past year. Shares of CW, TDY and HEI have surged 35.5%, 19.7% and 17.8%, respectively.

What’s Been Pushing KTOS Stock Up?

Kratos Defense’s shares have been riding high at the bourses on the back of solid contract wins, thanks to the company’s combat-proven defense products, solid defense budget funding offered by the U.S. government and diversified product portfolio.

Impressively, in January 2025, KTOS clinched a five-year OTA contract worth $1.45 billion for the Multi-Service Advanced Capability Hypersonic Test Bed (MACH-TB) 2.0 under Task Area 1. This contract marked the largest award secured by KTOS in its history. With Mach-TB intended to provide an affordable bridge between hypersonic ground tests and system-level flight tests, the aforementioned award win signifies Kratos Defense’s strengthening footprint in hypersonic technology development.

Earlier in October 2024, the company revealed its partnership agreement with Radisys Corporation to develop cloud-native 5G-NTN (non-terrestrial network) solutions for satellite connectivity. These solutions will be available through Kratos OpenSpace Platform, the only commercially available, fully software-defined satellite ground system.

In July, KTOS joined forces with GE Aerospace to develop and produce small, affordable engines that could potentially power unmanned aerial systems (UAS), collaborative combat aircraft and similar applications. These partnerships indicate KTOS’ versatility in providing a wide array of products, from combat drones to commercial satellite systems.

Can KTOS Continue With Its Winning Streak?

With the geopolitical and global security landscape acting in favor of the defense industry, growth opportunities for stocks like KTOS remain immense. To this end, it is imperative to mention that Kratos' Microwave Electronics business, which supports Iron Dome, Tamir, Iron Sting, Arrow, Barak and other systems, constitutes a record-level backlog and opportunity pipeline. This business growth will be further supported by the expansion of its existing microwave facility as well as a new production facility, both of which are in Israel and expected to be completed this year.

Amid growing hostilities across the world, KTOS expects to see increased demand for its target drone, ballistic missile targets and hypersonic target franchises. To capitalize on this enhanced demand, Kratos has been making steady investments to expand certain of its production facilities, particularly for microwave products, rocket systems, and hypersonic businesses. This, in turn, should significantly boost its top and bottom-line figures in the days ahead.

A quick sneak peek at its near-term estimates reflects a similar picture.

Upbeat Estimates for Kratos Defense

The Zacks Consensus Estimate for KTOS’ first-quarter 2025 sales suggests an improvement of 9.5% from the year-ago quarter’s reported figure, and the same for earnings indicates a rise of 18.2%. A similar improvement trend can be observed in its 2025 estimates.

On the other hand, the bottom-line estimate for first-quarter and full-year 2025 remained unchanged over the past 60 days. This indicates analysts' confidence in the company’s earnings growth ability.

Kratos Defense & Security Solutions, Inc. KTOS reported fourth-quarter 2024 adjusted earnings of 13 cents per share, up 8.3% from 12 cents in the prior-year quarter. The bottom line also surpassed the Zacks Consensus Estimate of nine cents per share by 44.4%.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

Kratos Defense reported GAAP earnings of three cents per share compared with two cents in the fourth quarter of 2023.

The company reported 2024 adjusted earnings of 49 cents per share, which were higher than the year-ago figure of 42 cents. The full-year bottom line also surpassed the Zacks Consensus Estimate of 46 cents per share.

KTOS’ Total Revenues

Total revenues were $283.1 million, which missed the Zacks Consensus Estimate of $288 million by 1.8%. The figure, however, rose 3.4% from $273.8 million recorded in the year-ago quarter.

The year-over-year improvement can be attributed to the Unmanned Systems and Kratos Government Solutions segments’ revenue growth.

The company reported total revenues of $1.14 billion in 2024, which were higher than $1.04 billion in 2023. The full-year top line was in line with the Zacks Consensus Estimate.

Kratos Defense & Security Solutions, Inc. Price, Consensus and EPS Surprise

Kratos Defense & Security Solutions, Inc. price-consensus-eps-surprise-chart | Kratos Defense & Security Solutions, Inc. Quote

Operational Update of Kratos Defense

Kratos Defense’s selling, general and administrative expenses increased 1.1% year over year. Research and development expenses rose 32.5%. Depreciation expenses surged 19% year over year.

Expenses related to the amortization of intangible assets decreased 8.7% year over year.

The company reported operating income of $3 million, which declined from the year-ago quarter’s $11.7 million.

It posted a consolidated book-to-bill ratio of 1.5-1.0, with bookings worth $434.2 million.

The total backlog at the end of the fourth quarter was $1.45 billion compared with $1.29 billion at the end of the third quarter of 2024.

KTOS’ Segmental Performance

Unmanned Systems: Net revenues improved 10.3% year over year to $61.1 million.

Kratos Government Solutions: Net revenues improved 1.6% to $222 million on a year-over-year basis.

Financial Details of KTOS

As of Dec. 29, 2024, cash and cash equivalents totaled $329.3 million, up from $72.8 million as of Dec. 31, 2023.

The long-term debt amounted to $174.6 million as of Dec. 29, 2024, down from $219.3 million recorded as of Dec. 31, 2023.

The net cash flow from operating activities amounted to $49.7 million during 2024 compared with $65.2 million at the end of 2023.

Kratos Defense’s 2025 Guidance

Kratos Defense has introduced its first-quarter and full-year 2025 guidance.

KTOS projects first-quarter 2025 revenues to be in the range of $285-$295 million. The Zacks Consensus Estimate for revenues is pegged at $303.5 million, higher than the company’s guided range.

KTOS expects 2025 revenues to be in the $1.26-$1.29 billion range. The Zacks Consensus Estimate for revenues is pegged at $1.28 million, almost in line with the mid-point of the company’s guided range.

Kratos Defense expects operating cash flows to be in the range of $50-$60 million and free cash outflow to be in the range of $75-$85 million for 2025.

KTOS’ Zacks Rank

Kratos Defense currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Recent Defense Releases

Teledyne Technologies Inc. TDY reported fourth-quarter 2024 adjusted earnings of $5.52 per share, which surpassed the Zacks Consensus Estimate of $5.23 by 5.5%. Total sales were $1.50 billion, which beat the consensus estimate of $1.45 billion by 3.7%.

Textron Inc. TXT reported fourth-quarter 2024 adjusted earnings of $1.34 per share, which beat the Zacks Consensus Estimate of $1.25 by 7.2%. The company reported total revenues of $3.61 billion, which missed the consensus estimate of $3.74 billion by 3.5%.

Hexcel Corporation HXL reported fourth-quarter 2024 adjusted earnings of 52 cents per share, which surpassed the Zacks Consensus Estimate of 51 cents by 2%. The company’s net sales totaled $473.8 million, which beat the consensus estimate of $471 million by 0.6%.

This article originally published on Zacks Investment Research (zacks.com).

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