Updated Aug 6 at 2:02pm ET.
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Kratos has been awarded a contract by the U.S. Army to develop a next-generation seeker for the Javelin missile. A seeker is the electronic eye at the front of a missile that identifies and tracks a target to ensure a precise hit.
While the company did not disclose the dollar value, the win is important because it expands Kratos' role in high-priority missile programs. It shows the company is successfully moving beyond just building drones and into the complex sensors and electronics that go inside the military's most widely used weapons.
Source: GlobeNewsWire
Stifel Nicolaus has set a price target of $115 for Kratos. This suggests the firm sees significant room for the stock to rise from its current level of about $58.
This move comes as analysts digest the company's recent growth in its drone and satellite segments. While price targets are just estimates of what a stock might be worth in a year, this high target reflects a belief that the company's record backlog will successfully turn into higher profits.
Source: Stifel Nicolaus
Canaccord Genuity has set a price target of $135 for Kratos. This is one of the most optimistic views on the stock, valuing the company at more than double its current price.
This valuation likely hinges on Kratos winning major production roles for its Valkyrie drone and hypersonic engines. If those programs move from testing to large-scale manufacturing, the company's revenue could grow much faster than it has historically.
Source: Canaccord Genuity
Piper Sandler upgraded the stock to Overweight, a rating that means they expect it to perform better than the average stock in the market. They also set a price target of $75.
The upgrade follows a period of heavy spending by Kratos to build out its manufacturing capacity. The analysts appear more confident that this investment is starting to pay off through new contract wins and faster revenue growth.
Source: Piper Sandler
Kratos delivered a strong second quarter, with revenue reaching about $459 million, well ahead of the $410 million analysts expected. Profits also came in higher than forecast at $0.21 per share. The company's core government business grew 36 percent compared to last year, driven by high demand for its specialized defense hardware.
Management raised its full-year revenue guidance to a range of $1.75 billion to $1.81 billion. The most important metric for long-term health was the book-to-bill ratio of 1.3 to 1 over the last year. This means for every dollar of products Kratos delivered, it booked $1.30 in new orders, growing its total backlog to nearly $2 billion. This provides a clear path for growth as the company works through these existing contracts.
See the full quarter, and how our tracked metrics did
Source: 8-K filing
Analysts recently flooded the stock with positive updates following strong quarterly earnings. Most analysts rate the stock a buy, and the average price target of $100 suggests the share price could rise by 74%.
Management has beaten expectations for eight straight quarters, usually by a few cents, which shows they are consistently clearing the bar they set for themselves.
| Expectation | |
|---|---|
| EPS | $0.21 |
| Revenue | $467M |
GlobeNewsWire · Press release · Aug 6
Seeking Alpha · Opinion · Aug 4
GlobeNewsWire · Press release · Aug 4
Seeking Alpha · Opinion · Jul 15
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