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Kratos Defense (KTOS)
NASDAQ:KTOS
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Kratos Defense
(NASDAQ:KTOS)
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Rating:68Neutral
Price Target:
$75.00
▼(-7.01% Downside)
Kratos Defense's overall stock score is driven by strong earnings call results and positive corporate events, indicating future growth potential. However, challenges in profitability, cash flow management, and high valuation metrics weigh down the score. Technical indicators suggest strong momentum but caution due to overbought conditions.
Positive Factors
Revenue Growth
Kratos' robust revenue growth, particularly in key sectors, underscores its expanding market presence and product demand, supporting long-term growth prospects.
Strategic Investments
Strategic investments in manufacturing expansion position Kratos to capitalize on future demand, enhancing its competitive edge and operational capacity.
Debt Reduction
By eliminating its term loan debt, Kratos improves its financial flexibility and reduces interest expenses, strengthening its balance sheet for future growth.
Negative Factors
Profitability Challenges
Low profitability margins suggest Kratos may struggle with cost control or competitive pricing, potentially impacting long-term financial performance.
Cash Flow Management
Negative free cash flow indicates potential liquidity issues, limiting Kratos' ability to reinvest in growth and manage financial obligations effectively.
Cost Pressures
Rising costs can erode profit margins and affect Kratos' pricing strategy, posing a risk to its competitive position and financial health.
Kratos Defense (KTOS) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$12.78B
Dividend YieldN/A
Average Volume (3M)3.44M
Price to Earnings (P/E)865.3
Beta (1Y)1.19
Revenue Growth7.76%
EPS Growth40.33%
CountryUS
Employees4,000
SectorIndustrials
Sector Strength72
IndustryAerospace & Defense
Share Statistics
EPS (TTM)0.11
Shares Outstanding168,794,500
10 Day Avg. Volume3,144,695
30 Day Avg. Volume3,435,683
Financial Highlights & Ratios
PEG RatioN/A
Price to Book (P/B)N/A
Price to Sales (P/S)N/A
P/FCF RatioN/A
Enterprise Value/Market Cap0.52
Enterprise Value/Revenue5.53
Enterprise Value/Gross Profit23.43
Enterprise Value/Ebitda85.49
Forecast
1Y Price Target
$69.92Price Target Upside-13.30% Downside
Rating ConsensusStrong Buy
Number of Analyst Covering14
Kratos Defense Business Overview & Revenue Model
Company DescriptionKratos Defense & Security Solutions, Inc. operates as a government contractor of the U.S. Department of Defense. The company operates through two segments, Kratos Government Solutions and Unmanned Systems. The Kratos Government Solutions segment offers microwave electronic products, space and satellite communications, training and cybersecurity/ warfare, C5ISR/ modular systems, turbine technologies, and defense and rocket support services. The Unmanned Systems segment provides unmanned aerial systems, and unmanned ground and seaborne systems. It serves national security related agencies, the department of defense, intelligence agencies, and classified agencies, as well as international government agencies and domestic and international commercial customers. Kratos Defense & Security Solutions, Inc. was incorporated in 1994 and is headquartered in San Diego, California.
How the Company Makes MoneyKratos generates revenue primarily through government contracts, selling its products and services to various branches of the U.S. Department of Defense and other government agencies. Key revenue streams include the development and production of unmanned aerial systems, satellite communication technologies, and advanced cybersecurity solutions. The company also engages in research and development projects funded by government contracts, which contribute significantly to its earnings. Additionally, Kratos has established strategic partnerships with other defense contractors and technology firms, enhancing its capabilities and expanding its market reach, further supporting its financial performance.
Kratos Defense Earnings Call Summary
Earnings Call Date:Aug 07, 2025
(Q2-2025)
| % Change Since: |
Next Earnings Date:Oct 30, 2025
Earnings Call Sentiment Positive
The earnings call highlighted strong revenue growth, significant contract wins, and increased guidance, suggesting a positive outlook. However, challenges such as cost pressures and delays in government approvals were noted but did not overshadow the positive developments.Q2-2025 Updates
Positive Updates
Record Revenue and Growth
Kratos reported Q2 revenues of $351.5 million, exceeding the estimated range of $300 million to $310 million, with notable growth in defense rocket support (116.6%) and C5ISR businesses (25.4%).
New Contract Wins
Kratos secured a large new program, Poseidon, with a potential value of $750 million, expected to ramp in 2027. Additionally, the company was down-selected for another program, DMOS, with a contract expected shortly.
Strong Backlog and Pipeline
Kratos reported a record bid and proposal pipeline of $13 billion and a book-to-bill ratio of 1.2:1.
Increased Guidance
Full-year 2025 revenue guidance increased to $1.290 billion to $1.310 billion, with an adjusted EBITDA guidance increase to $114 million to $120 million.
Significant Opportunities in Tactical Drones
Kratos' Valkyrie drone has been recognized as a program of record by the U.S. Marine Corps and has partnerships with Airbus for European missions.
Strategic Investments
Kratos is investing in expanding manufacturing and production facilities, with plans to build out new facilities for upcoming programs like Poseidon.
Debt Paydown
Kratos paid off its entire term loan balance of approximately $180 million, minimizing interest expense in the second half of 2025.
Negative Updates
Continued Cost Pressures
Kratos faces increased contractor and material costs on certain multiyear firm fixed price contracts, impacting margins, especially in the Unmanned Systems business.
Free Cash Flow Usage
Free cash flow used in operations for the second quarter was $31.1 million after capital expenditures, reflecting the continued investment in expansion and development.
Delayed Government Approvals
Kratos is awaiting government approvals for certain product sales, which if delayed, could push expected contributions to the fourth quarter.
Company Guidance
During the Kratos Defense & Security Solutions Second Quarter 2025 Earnings Call, the company reported a notable Q2 organic revenue growth of 15%, supported by record-level bid and proposal pipeline of $13 billion, and a backlog with a book-to-bill ratio of 1.2:1. The quarter's revenue reached $351.5 million, surpassing the forecasted range of $300-$310 million, with particularly strong performance in defense rocket support and C5ISR businesses, showing organic growth rates of 116.6% and 25.4%, respectively. Adjusted EBITDA was also above expectations at $28.3 million. Kratos raised its full-year revenue guidance to $1.290-$1.310 billion and increased its adjusted EBITDA guidance to $114-$120 million, projecting an organic revenue growth rate of 11%-13% over 2024. Significant future growth is anticipated from new programs, including the Poseidon program, valued at approximately $750 million, and the Valkyrie drone, now identified as a program of record by the U.S. Marine Corps and partnering with Airbus for European markets. Kratos also emphasized its strategic positioning in hypersonics and jet engines, expecting these to be major growth drivers in the coming years.Kratos Defense Financial Statement Overview
Summary
Kratos Defense shows moderate revenue growth but faces challenges with profitability and cash flow management. The company maintains a strong balance sheet with low leverage, providing financial stability, but needs to improve operational efficiency and cash flow generation.Income Statement
Kratos Defense shows moderate revenue growth with a 4.43% increase in TTM, indicating a positive trajectory. However, profitability margins such as the net profit margin (1.20%) and EBIT margin (1.99%) are relatively low, suggesting challenges in cost management or pricing power. The gross profit margin has slightly decreased over time, indicating potential pressure on production costs or pricing strategies.65
Positive
Balance Sheet
The company maintains a strong balance sheet with a low debt-to-equity ratio of 0.056, indicating conservative leverage and financial stability. The equity ratio is healthy, reflecting a strong capital base. However, the return on equity (ROE) is low at 0.96%, suggesting limited profitability relative to shareholder equity.75
Positive
Cash Flow
Kratos Defense faces challenges in cash flow management, with negative free cash flow and a high free cash flow to net income ratio of -5.67, indicating cash flow issues relative to earnings. The operating cash flow to net income ratio is low at 0.033, suggesting inefficiencies in converting earnings into cash.50
Neutral
| Breakdown | TTM | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|---|---|
Income Statement | ||||||
| Total Revenue | 1.21B | 1.14B | 1.04B | 898.30M | 811.50M | 747.70M |
| Gross Profit | 286.40M | 287.20M | 268.60M | 226.00M | 225.10M | 203.20M |
| EBITDA | 78.50M | 96.40M | 79.50M | 26.50M | 62.80M | 64.40M |
| Net Income | 14.50M | 16.30M | -8.90M | -36.90M | -2.00M | 79.60M |
Balance Sheet | ||||||
| Total Assets | 2.59B | 1.95B | 1.63B | 1.55B | 1.59B | 1.56B |
| Cash, Cash Equivalents and Short-Term Investments | 783.60M | 329.30M | 72.80M | 81.30M | 349.40M | 380.80M |
| Total Debt | 279.30M | 282.00M | 321.40M | 301.80M | 339.50M | 348.50M |
| Total Liabilities | 625.70M | 597.70M | 634.00M | 604.00M | 629.20M | 622.70M |
| Stockholders Equity | 1.96B | 1.35B | 976.00M | 936.30M | 945.10M | 925.30M |
Cash Flow | ||||||
| Free Cash Flow | -61.20M | -8.50M | 12.80M | -71.10M | -15.70M | 10.70M |
| Operating Cash Flow | 10.80M | 49.70M | 65.20M | -25.70M | 30.80M | 46.60M |
| Investing Cash Flow | -72.00M | -69.70M | -43.80M | -177.40M | -52.10M | -87.30M |
| Financing Cash Flow | 534.90M | 277.60M | -30.70M | -63.30M | -9.30M | 247.70M |
Kratos Defense Technical Analysis
Positive
80.65
Price Trends
63.12
Positive
50.98
Positive
40.39
Positive
Market Momentum
3.55
Negative
79.16
Negative
95.29
Negative
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For KTOS, the sentiment is Positive. The current price of 80.65 is above the 20-day moving average (MA) of 68.12, above the 50-day MA of 63.12, and above the 200-day MA of 40.39, indicating a bullish trend. The MACD of 3.55 indicates Negative momentum. The RSI at 79.16 is Negative, neither overbought nor oversold. The STOCH value of 95.29 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for KTOS.
Kratos Defense Risk Analysis
Kratos Defense disclosed 67 risk factors in its most recent earnings report. Kratos Defense reported the most risks in the "Finance & Corporate" category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Kratos Defense Peers Comparison
Overall Rating
UnderperformOutperform
Sector (63)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
79 Outperform | 10.44B | 27.58 | 11.46% | 0.09% | 22.95% | -1.01% | |
77 Outperform | 10.69B | 20.41 | 10.75% | 1.97% | -1.75% | -29.19% | |
73 Outperform | 11.05B | 44.65 | 8.33% | 0.63% | 11.43% | 32.31% | |
71 Outperform | 14.74B | 18.71 | 10.98% | 0.10% | 1.19% | -6.77% | |
68 Neutral | $12.78B | 865.34 | 0.88% | ― | 7.76% | 40.33% | |
63 Neutral | 13.59B | -441.48 | 4.92% | ― | 44.04% | -129.81% | |
63 Neutral | $10.79B | 15.43 | 7.44% | 2.01% | 2.89% | -14.66% |
* Industrials Sector Average
Performance Comparison
KTOS
Kratos Defense
80.65
57.74
252.03%
AVAV
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283.43
100.67
55.08%
ERJ
Embraer SA
57.32
22.26
63.49%
HII
Huntington Ingalls
274.69
13.93
5.34%
DRS
Leonardo Drs
42.58
14.38
50.99%
TXT
Textron
83.92
-3.90
-4.44%
Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.