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

Kratos Defense & Security Solutions, Inc. KTOS is set to release second-quarter 2020 results on Aug 4, after market close. A decline in the demand for its commercial aero and power products is likely to have affected revenues in the to-be-reported quarter.

The company boasts a four-quarter earnings surprise of 18.67%, on average.

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

Factors at Play

The coronavirus pandemic moderately affected Kratos’s production, flight testing and overall operational efficiency during the first quarter of 2020. Now, with the second wave of the virus outbreak, the company’s soon-to-be-reported performance is likely to show signs of weakness.

Lately, the company has been witnessing delays in certain supplier deliveries and the reduction in demand from certain of its commercial aero and power customers, primarily with Kratos Turbine Technologies and the Microwave Electronics business. This might have marred the quarterly performance of its largest segment, Government Solutions, which comprises microwave electronic products. Notably, the Zacks Consensus Estimate for revenues in the Government Solutions unit stands at $127 million, indicating a decline of 12.4% from the year-ago quarter’s reported figure.

Notably, these events are likely to have negatively impacted the company’s overall quarterly revenues. In line with this, the Zacks Consensus Estimate for second-quarter revenues stands at $167 million, which indicates a decline of 11.3% from the year-ago quarter’s reported figure.

In the wake of the coronavirus outbreak, Kratos has been witnessing certain program delays. As a result, program deliveries have now been pushed from 2020 to 2021, thereby increasing its expenses. Further, the impact of the USN app Navy training program and protest situation is expected to have reduced margin rates for the company. These factors might have weighed on its bottom-line performance in the soon-to-be-reported quarter.

The Zacks Consensus Estimate for Kratos’ second-quarter earnings currently pegged at 5 cents implies a 37.5% decline from the prior-year quarter’s reported figure.

What the Zacks Model Unveils

Our proven model does not conclusively predict an earnings beat for Kratos this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. But this is not the case here.

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

Zacks Rank: Kratos carries a Zacks Rank #4 (Sell), currently.

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

Stocks to Consider

Here is a stock from the Aerospace sector you may want to consider, as our model shows that it hasthe right combination of elements to post an earnings beat this season.

Leidos Holdings LDOS is scheduled to report second-quarter 2020 earnings on Aug 4. It has an Earnings ESP of +0.11% and a Zacks Rank #3.

Recent Defense Releases

Lockheed Martin Corp. LMT, a Zacks Rank #3 company, reported second-quarter 2020 adjusted earnings of $6.13 per share, which surpassed the Zacks Consensus Estimate of $5.71 by 7.4%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Hexcel Corporation HXL, a Zacks Rank #3 company, reported second-quarter 2020 adjusted earnings of 8 cents per share, which missed the Zacks Consensus Estimate of 20 cents by 60%.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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