Kratos Pops 9% On $400M US Skyborg Contract Award

Kratos Defense (KTOS) has announced that Kratos Unmanned Systems Division has been awarded a five-year indefinite delivery, indefinite quantity (IDIQ) contract of up to $400M for the development, integration, and prototype air vehicle delivery for the US Air Force’s Skyborg program. 

Shares in the unmanned system specialist popped 9% on the news, and spiked a further 3% in Friday’s after-hours trading.

Work under the program award will be performed at secure Kratos manufacturing and production facilities located in Oklahoma and California over the next 60 months, Kratos says.

“Skyborg is a critical U.S. Air Force Vanguard program that will ensure the United States maintains our technological dominance in a period of significant nation-state competition and our readiness for the future of aircraft-based warfare” commented Steve Fendley, President of Kratos Unmanned Systems Division.

He added: “Kratos has been and remains committed to advancing affordable unmanned technologies, and we are proud to be a Skyborg prime contractor, helping enable the DoD to significantly increase mass and effect at dramatically reduced cost compared to traditional aircraft programs.”

Indeed according to the Department of Defense’s statement, Skyborg is an autonomous attritable aircraft capable of achieving a diverse set of missions to generate massed combat power; delivering a future Air Force which can deter, blunt and defeat peer adversaries.

Analysts have a unanimously bullish take on KTOS stock with five recent back-to-back buy ratings. The Strong Buy analyst consensus comes with a $23.60 average analyst price target for upside potential of 22%. Shares are up 7% year-to-date.

Following the news B Riley FBR analyst Mike Crawford reiterated his buy rating on the stock with a $24 price target (24% upside potential).

“We believe Skyborg is a landmark development for KTOS. To the extent the DoD releases the first task order on Skyborg as expected in coming weeks, we don’t believe any other ID/IQ winner would be poised to compete against KTOS given its flight-proven Valkyrie and hot production line” he commented. (See Kratos stock analysis on TipRanks).

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