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Why Is Kratos (KTOS) Up 7.4% Since Last Earnings Report?

A month has gone by since the last earnings report for Kratos (KTOS). Shares have added about 7.4% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Kratos due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Kratos Defense Q1 Earnings Top, Revenues Rise Y/Y  

Kratos Defense reported first-quarter 2024 adjusted earnings of 11 cents per share, up 83.3% from 6 cents reported in the prior-year quarter. The figure also surpassed the Zacks Consensus Estimate of earnings of 5 cents per share by 120%.

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Kratos Defense reported GAAP earnings of a penny per share against a loss of 5 cents per share in the first quarter of 2023.

Total Revenues

Total revenues were $277.2 million, which surpassed the Zacks Consensus Estimate of $251 million by 10.5%. The figure also increased 19.6% from $231.8 million recorded in the year-ago quarter.

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

Operational Update

Kratos Defense’s selling, general and administrative expenses increased 12.5% year over year while research and development expenses were down 5.9%. Depreciation expenses increased 35.7% while expenses related to the amortization of intangible assets surged 31.3%.

The company reported operating income of $7 million, which increased massively from the year-ago quarter’s $0.5 million.

It posted a consolidated book-to-bill ratio of 1.1-1.0, with bookings worth $381.1 million.

The total backlog at the end of the first quarter was $1.27 billion compared with $1.24 billion at the end of the fourth quarter 2023.

Segmental Performance

Unmanned Systems: Net revenues improved 23.8% year over year to $59.4 million.

Kratos Government Solutions: Net revenues increased 47.9% to $217.8 million on a year-over-year basis.

Financial Details

As of Mar 31, 2024, cash and cash equivalents totaled $338.9 million, up from $72.8 million as of Dec 31, 2023. The long-term debt amounted to $179.4 million as of Mar 31, 2024, down from $219.3 million recorded as of Dec 31, 2023.

During the first quarter, cash flow from operating activities totaled $0.7 million against cash outflow of $25.7 million in the previous year.

Guidance

Kratos Defense has provided its outlook for the second quarter and reiterated its 2024 guidance. For the second quarter, it expects revenues in the $265-$280 million range. The Zacks Consensus Estimate for revenues is pegged at $269.8 million, lower than the midpoint of the company’s guided range.

For 2024, Kratos Defense still expects revenues in the range of $1.13-$1.15 billion. The consensus estimate for revenues is pegged at $1.13 billion, which lies almost in line with the lower end of the company’s projected range.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates review.

The consensus estimate has shifted 6.15% due to these changes.

VGM Scores

At this time, Kratos has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions has been net zero. Notably, Kratos has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Kratos is part of the Zacks Aerospace - Defense Equipment industry. Over the past month, Teledyne Technologies (TDY), a stock from the same industry, has gained 0.8%. The company reported its results for the quarter ended March 2024 more than a month ago.

Teledyne reported revenues of $1.35 billion in the last reported quarter, representing a year-over-year change of -2.4%. EPS of $4.55 for the same period compares with $4.53 a year ago.

Teledyne is expected to post earnings of $4.49 per share for the current quarter, representing a year-over-year change of -3.9%. Over the last 30 days, the Zacks Consensus Estimate has changed -0.3%.

Teledyne has a Zacks Rank #4 (Sell) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of C.

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Kratos Defense & Security Solutions, Inc. (KTOS) : Free Stock Analysis Report

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