Kratos Defense & Security Solutions, Inc. KTOS recently secured a modification contract involving the XQ-58A Unmanned Aerial Systems. The Naval Air Warfare Aircraft Division, Patuxent River, MD, has awarded the deal.
Valued at $22.9 million, the contract is scheduled to be completed by September 2024. Per the terms of the deal, Kratos Defense will offer non-recurring engineering support for mission systems and subsystems integration of the XQ-58A Unmanned Aerial Systems. The majority of the work related to the deal will be carried out in Sacramento, CA.
What’s Favoring KTOS?
In the scenario of consistent augmented spending on military arms and ammunition and other warfare needs, increased spending on autonomous capabilities like unmanned aerial vehicles (UAV) is being witnessed. This tends to benefit Kratos as its expertise in manufacturing UAVs for military missions has been offering it the privilege of winning many relevant orders that provide a boost to its order book.
The latest contract win is a bright example of that and bears testimony to the fact that Kratos’ revenue generation prospects continue to be fueled by such order wins. Its XQ-58 Valkyrie is a stealthy unmanned combat aerial vehicle and provides an affordable, significantly lower cost/weight solution as an unmanned escort. The Valkyrie can serve as a loyal wingman, conduct single UAS operations or operate in swarms.
Due to affordability, survivability, long range, high-subsonic speeds, maneuverability and ability to carry flexible mission kit configurations, KTOS may continue to lock in such orders in the days ahead involving the UAV. Such orders should boost the company’s revenue generation prospects.
Due to the significant interest of the military in UAVs and the continuous rising focus on increasing spending on this segment, we may expect the UAV market to be on an impressive growth trajectory. In this context, per the report from the Markets and Markets firm, the UAV market is poised to witness a CAGR of 7.9% over the 2022-2027 period.
This reflects expanding market opportunities for companies like KTOS that enjoy an established position in UAV manufacturing. Other defense majors that may benefit from the increasing demand for UAVs are as follows:
Northrop Grumman NOC: It is a leader in autonomous systems and offers an impressive portfolio of UAVs. Some of its products include Global Hawk, MQ-4C Triton, Future Autonomous Air, etc.
Northrop has a long-term earnings growth rate of 2.4%. Its investors have gained 7.2% in the past six months.
Lockheed Martin LMT: It has been delivering advanced autonomous systems to the U.S. military and allies to meet the requirements of the most demanding missions. Its UAV product range includes Indago 3, MATRIX Technology, Stalker, etc.
Lockheed Martin’s long-term earnings growth rate is 8.6%. Shares of LMT have returned 6.3% value to investors in the past three months.
Boeing BA: Its full range of unmanned aerial systems offers intelligent, persistent and efficient solutions for a range of customers and missions worldwide. Its products include ScanEagle, Integrator and MQ-25.
Boeing boasts a long-term earnings growth rate of 4%. Shares of BA have increased 31.6% in the past year.
In the past six months, shares of Kratos have increased 43.3% compared with the industry’s growth of 14.5%.
Image Source: Zacks Investment Research
Kratos currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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