Australia markets closed

Kratos Defense (KTOS) to Post Q2 Earnings: What's in Store?

Zacks Equity Research

Kratos Defense & Security Solutions, Inc. KTOS is set to release second-quarter 2019 results on Jul 31, after market close. Demand is increasing in each of Kratos' core business areas, which includes space and satellite communications, unmanned systems drones, and others.

In the last reported quarter, the company delivered a positive earnings surprise of 300%. Moreover, Aerojet Rocketdyne’s earnings surpassed the Zacks Consensus Estimate in the trailing four quarters, the average positive surprise being 154.17%.

Let’s see how things are shaping up prior to this announcement.

Factors Under Consideration

During the second quarter, Kratos won a handful of contracts, which in turn should boost its quarterly backlog.

Moreover, the company launched the first MQM-178 Firejet target drone aircraft and a few cloud-based ground system products for commercial and government satellite operators. Such innovations are expected to drive the company’s sales volume in the soon-to-reported quarter.

During the first-quarter earnings call, the company revealed its financial guidance for the second quarter, where it expects revenues of $175-$185 million.

Cumulatively, the Zacks Consensus Estimate for second-quarter revenues stands at $178 million, which lies below the mid-point of the company provided guidance and indicates a rise of 17.9% from the year-ago quarter’s reported figure.

Furthermore, the company announced a collaboration plan with AeroVironment AVAV in May. Per the terms, AeroVironment’s small unmanned aircraft and tactical missile systems will be integrated with Kratos' high-speed, low-cost drones. We expect positive synergies from this agreement to get reflected in the upcoming results.

Moreover, Kratos has been experiencing low operating expenses over the last couple of quarters. We expect similar trends to continue in the soon-to-be-reported quarter, which in turn may favorably impact the company’s bottom line. In line with this, the Zacks Consensus Estimate for Kratos’ second-quarter earnings is pegged at 7 cents, implying growth of 250% from the prior-year quarter’s reported figure.

Earnings Whispers

Our proven model does not conclusively show that Kratos is likely to beat on earnings this quarter. This is because a stock needs to have both — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — for this to happen. This is not the case here, as you will see below.

Earnings ESP: The company has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Kratos currently sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

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

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

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

Upcoming Defense Releases

Investors can consider the following players from the Aerospace sector that have the right combination of elements to beat on earnings in their next releases.

Ducommun Incorporated DCO is expected to report second-quarter 2019 results on Aug 5. The company has an Earnings ESP of +12.05% and a Zacks Rank #3.

Triumph Group, Inc. TGI is expected to report first-quarter fiscal 2020 results on Jul 31. The company has an Earnings ESP of +6.03% and a Zacks Rank #3.

Today's Best Stocks from Zacks

Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2018, while the S&P 500 gained +15.8%, five of our screens returned +38.0%, +61.3%, +61.6%, +68.1%, and +98.3%.

This outperformance has not just been a recent phenomenon. From 2000 – 2018, while the S&P averaged +4.8% per year, our top strategies averaged up to +56.2% per year.

See their latest picks free >>