Kratos Defense Secures $231.5 Million Contract Amid Drone Market Growth
Written by Emily J. Thompson, Senior Investment Analyst
Updated: Mar 04 2024
0mins
Should l Buy KTOS?
Source: SeekingAlpha
Kratos Defense and Security Solutions Inc's stock fell 4.63% and hit a 20-day low amid a strong performance in the broader market, with the Nasdaq-100 up 1.26% and the S&P 500 up 0.74%.
The decline in Kratos's stock comes despite the company securing a significant $231.5 million contract from the U.S. Marine Corps for its Valkyrie unmanned combat vehicle, reflecting robust demand in the drone market. Additionally, Kratos reported a 19% revenue increase to $1.3 billion in 2025, driven by successful product launches and a positive outlook for 2026, with management forecasting revenues between $1.6 billion and $1.7 billion.
This contract and the overall growth in the drone sector highlight Kratos's competitive positioning, yet the stock's decline suggests a potential sector rotation or profit-taking by investors, despite the favorable market conditions.
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Analyst Views on KTOS
Wall Street analysts forecast KTOS stock price to rise
13 Analyst Rating
11 Buy
2 Hold
0 Sell
Strong Buy
Current: 57.890
Low
80.00
Averages
108.69
High
150.00
Current: 57.890
Low
80.00
Averages
108.69
High
150.00
About KTOS
Kratos Defense & Security Solutions, Inc. is a technology, products, system and software company addressing the defense, national security, and commercial markets. It operates through two segments: Kratos Government Solutions (KGS) and Unmanned Systems (US). The KGS segment includes its microwave electronic products, space, satellite and cyber, training solutions, command, control, communication, computing, combat, intelligence surveillance and reconnaissance (C5ISR)/modular systems, turbine technologies, and defense and rocket support services operating segments. The US segment consists of its unmanned aerial, unmanned ground, unmanned seaborne and related command, control and communications system businesses. Its KGS and US segments provide products, solutions and services for mission-critical National Security programs. KGS and US customers primarily include National Security-related agencies, the DoD, intelligence agencies and classified agencies, and others.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
Kratos Q1 Earnings Beat Expectations but Stock Falls
- Earnings Beat: Kratos reported Q1 earnings of $0.16 per share, exceeding analysts' expectations of $0.13, with sales reaching $371 million, a 23% year-over-year increase driven by a 31% growth in its unmanned systems unit, although government solutions only grew by 12%.
- Cash Flow Issues: Despite GAAP earnings more than doubling to $0.07 per share, the company reported negative free cash flow of $47.3 million for the quarter, indicating ongoing cash burn pressures, although this was an improvement compared to Q1 2025.
- Strong Order Book: Kratos achieved a book-to-bill ratio of 1.6 in Q1, indicating robust new order growth, and is raising its sales guidance to $1.7 billion or better by the end of 2026, reflecting confidence in future growth prospects.
- Stock Performance Decline: Despite the earnings beat, Kratos's stock fell 5.3%, with a valuation exceeding 360 times earnings, and ongoing cash flow challenges diminishing the stock's appeal, prompting investors to reassess their holdings cautiously.
See More
Kratos Defense Reports Strong Q1 2026 Earnings and Increased Guidance
- Performance Exceeds Expectations: Kratos achieved $371 million in revenue for Q1 2026, surpassing the estimated range of $335 million to $345 million, indicating strong growth in defense and unmanned systems sectors, which is expected to enhance future profitability.
- Order and Production Capacity Expansion: The company reported a record backlog of $2 billion and an opportunity pipeline of $14 billion, suggesting that Kratos is actively expanding its production capabilities in response to robust market demand, particularly with plans to produce approximately 40 Valkyrie drones annually by 2028.
- Optimistic Financial Outlook: Management raised the full-year 2026 revenue guidance to $1.7 billion to $1.76 billion, reflecting contributions from the Orbit acquisition and a strong start, with Q2 revenue expected between $400 million and $410 million, indicating a potential organic growth of 4% to 7%.
- Challenges and Risks: Despite strong performance, management cautioned that contract award timing and supply chain readiness are key variables for future growth, particularly facing challenges in recruiting and retaining qualified personnel, which could impact the company's long-term execution capabilities.
See More
Clear Street Raises Kratos Price Target to $84 Amid Strong Earnings
- Price Target Increase: Clear Street raised Kratos' price target from $82 to $84, reflecting the analyst's confidence in the company's strong Q1 performance and long-term outlook, implying a 37% upside potential for the stock.
- Defense Spending Trends: The analyst highlighted a proposed $156 billion defense budget for 2026, which is expected to drive Kratos' growth, particularly against the backdrop of rising U.S. military spending, underscoring the company's strategic importance in the defense technology sector.
- Strong Backlog: Kratos reported a backlog of approximately $2 billion and an opportunity pipeline of $14 billion, indicating a favorable position in the growing defense demand landscape, thereby enhancing its market competitiveness.
- Retail Sentiment Shift: On Stocktwits, retail sentiment around Kratos shifted from neutral to 'extremely bullish', reflecting investor optimism about the company's future performance, despite the stock having declined nearly 19% year-to-date.
See More
KRATOS DEFENSE AND SECURITY SOLUTIONS INC: PIPER SANDLER LOWERS TARGET PRICE FROM $99 TO $75
- Price Adjustment: Piper Sandler has reduced its target price for Kraton from $99 to $75.
- Market Impact: This adjustment reflects changes in market conditions and expectations for the company's performance.
See More
Kratos Defense Q1 Earnings Beat Expectations with Strong Revenue Growth
- Earnings Highlights: Kratos Defense reported a Q1 non-GAAP EPS of $0.16, beating expectations by $0.03, indicating improved profitability and robust performance in the defense sector.
- Revenue Growth: The company achieved Q1 revenue of $371 million, a 22.6% year-over-year increase, surpassing market expectations by $25.72 million, reflecting sustained demand in defense technology.
- Future Outlook: Q2 revenue consensus stands at $412.63 million, with FY26 revenue consensus at $1.68 billion, showcasing the company's confidence in future growth and its strategic positioning in drone and hypersonic technology.
- Financial Forecast: The company anticipates R&D spending between $50 million and $53 million for FY26, with operating income projected between $18 million and $23 million, indicating ongoing investments in technological innovation and market expansion.
See More
KRATOS DEFENSE AND SECURITY Q2 ADJUSTED EBITDA EXPECTED BETWEEN USD 30-35 MILLION, BELOW IBES ESTIMATE OF USD 39.3 MILLION
Financial Overview: The adjusted EBITDA for Kratos Defense and Security is reported at USD 30-35 million.
Comparison with Estimates: This figure is significantly lower than the estimated USD 39.3 million by IBES.
See More
Kratos Q1 Earnings Beat Expectations but Stock Falls
- Earnings Beat: Kratos reported Q1 earnings of $0.16 per share, exceeding analysts' expectations of $0.13, with sales reaching $371 million, a 23% year-over-year increase driven by a 31% growth in its unmanned systems unit, although government solutions only grew by 12%.
- Cash Flow Issues: Despite GAAP earnings more than doubling to $0.07 per share, the company reported negative free cash flow of $47.3 million for the quarter, indicating ongoing cash burn pressures, although this was an improvement compared to Q1 2025.
- Strong Order Book: Kratos achieved a book-to-bill ratio of 1.6 in Q1, indicating robust new order growth, and is raising its sales guidance to $1.7 billion or better by the end of 2026, reflecting confidence in future growth prospects.
- Stock Performance Decline: Despite the earnings beat, Kratos's stock fell 5.3%, with a valuation exceeding 360 times earnings, and ongoing cash flow challenges diminishing the stock's appeal, prompting investors to reassess their holdings cautiously.
See More
Kratos Defense Reports Strong Q1 2026 Earnings and Increased Guidance
- Performance Exceeds Expectations: Kratos achieved $371 million in revenue for Q1 2026, surpassing the estimated range of $335 million to $345 million, indicating strong growth in defense and unmanned systems sectors, which is expected to enhance future profitability.
- Order and Production Capacity Expansion: The company reported a record backlog of $2 billion and an opportunity pipeline of $14 billion, suggesting that Kratos is actively expanding its production capabilities in response to robust market demand, particularly with plans to produce approximately 40 Valkyrie drones annually by 2028.
- Optimistic Financial Outlook: Management raised the full-year 2026 revenue guidance to $1.7 billion to $1.76 billion, reflecting contributions from the Orbit acquisition and a strong start, with Q2 revenue expected between $400 million and $410 million, indicating a potential organic growth of 4% to 7%.
- Challenges and Risks: Despite strong performance, management cautioned that contract award timing and supply chain readiness are key variables for future growth, particularly facing challenges in recruiting and retaining qualified personnel, which could impact the company's long-term execution capabilities.
See More
Clear Street Raises Kratos Price Target to $84 Amid Strong Earnings
- Price Target Increase: Clear Street raised Kratos' price target from $82 to $84, reflecting the analyst's confidence in the company's strong Q1 performance and long-term outlook, implying a 37% upside potential for the stock.
- Defense Spending Trends: The analyst highlighted a proposed $156 billion defense budget for 2026, which is expected to drive Kratos' growth, particularly against the backdrop of rising U.S. military spending, underscoring the company's strategic importance in the defense technology sector.
- Strong Backlog: Kratos reported a backlog of approximately $2 billion and an opportunity pipeline of $14 billion, indicating a favorable position in the growing defense demand landscape, thereby enhancing its market competitiveness.
- Retail Sentiment Shift: On Stocktwits, retail sentiment around Kratos shifted from neutral to 'extremely bullish', reflecting investor optimism about the company's future performance, despite the stock having declined nearly 19% year-to-date.
See More
KRATOS DEFENSE AND SECURITY SOLUTIONS INC: PIPER SANDLER LOWERS TARGET PRICE FROM $99 TO $75
- Price Adjustment: Piper Sandler has reduced its target price for Kraton from $99 to $75.
- Market Impact: This adjustment reflects changes in market conditions and expectations for the company's performance.
See More
Kratos Defense Q1 Earnings Beat Expectations with Strong Revenue Growth
- Earnings Highlights: Kratos Defense reported a Q1 non-GAAP EPS of $0.16, beating expectations by $0.03, indicating improved profitability and robust performance in the defense sector.
- Revenue Growth: The company achieved Q1 revenue of $371 million, a 22.6% year-over-year increase, surpassing market expectations by $25.72 million, reflecting sustained demand in defense technology.
- Future Outlook: Q2 revenue consensus stands at $412.63 million, with FY26 revenue consensus at $1.68 billion, showcasing the company's confidence in future growth and its strategic positioning in drone and hypersonic technology.
- Financial Forecast: The company anticipates R&D spending between $50 million and $53 million for FY26, with operating income projected between $18 million and $23 million, indicating ongoing investments in technological innovation and market expansion.
See More
KRATOS DEFENSE AND SECURITY Q2 ADJUSTED EBITDA EXPECTED BETWEEN USD 30-35 MILLION, BELOW IBES ESTIMATE OF USD 39.3 MILLION
Financial Overview: The adjusted EBITDA for Kratos Defense and Security is reported at USD 30-35 million.
Comparison with Estimates: This figure is significantly lower than the estimated USD 39.3 million by IBES.
See More
