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Kratos Defense (KTOS) to Post Q1 Earnings: What's in Store?

Zacks Equity Research
·4-min read

Kratos Defense & Security Solutions, Inc. KTOS is set to release first-quarter 2020 results on May 7, after market close.

In the last reported quarter, the company delivered a negative earnings surprise of 18.18%. However, Kratos’ earnings surpassed the Zacks Consensus Estimate in three of the trailing four quarters and missed in the remaining one, the average positive surprise being 81.17%. Let’s see how things are shaping up prior to this announcement.

Factors at Play

Kratos secured a handful of major contracts throughout the first quarter of 2020, which can be expected to have boosted its quarterly backlog.

During the fourth-quarter earnings call, the company revealed its expectation of robust organic revenue growth for 2020 in its Unmanned Systems and Satellite Communications businesses. We may expect these businesses to reflect solid growth trends in the upcoming results.

Particularly, recapitalization of strategic weapon systems, including missile, radar, hypersonic, BMD and unmanned systems areas, is expected to have boosted Kratos’ first-quarter revenues.  

The Zacks Consensus Estimate for first-quarter revenues stands at $164.9 million, which indicates a rise of 2.8% from the year-ago quarter’s reported figure.

Meanwhile, Kratos has been witnessing certain program delays, as a result of which 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’ first-quarter earnings currently pegged at 6 cents implies a 25% decline from the prior-year quarter’s reported figure.

Kratos Defense & Security Solutions, Inc. Price and EPS Surprise

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

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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 it 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 #3, currently. You can see the complete list of today’s Zacks #1 Rank stocks here.

Stocks to Consider

Here are a few defense companies you may want to consider, as our model shows these have the right combination of elements to post an earnings beat this quarter.

Spirit Aerosystems Holdings, Inc. SPR is scheduled to report its first-quarter 2020 earnings on May 6. It has an Earnings ESP of +18.35% and a Zacks Rank #3.

Huntington Ingalls Industries HII is scheduled to report first-quarter 2020 results on May 7. The company has an Earnings ESP of +1.79% and a Zacks Rank #3.

A Recent Defense Release

Lockheed Martin Corp. LMT reported first-quarter 2020 earnings of $6.08 per share, which surpassed the Zacks Consensus Estimate of $5.76 by 5.5%. The bottom line also improved 1.5% from the year-ago quarter’s $5.99.

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Lockheed Martin Corporation (LMT) : Free Stock Analysis Report
 
Spirit Aerosystems Holdings, Inc. (SPR) : Free Stock Analysis Report
 
Huntington Ingalls Industries, Inc. (HII) : Free Stock Analysis Report
 
Kratos Defense & Security Solutions, Inc. (KTOS) : Free Stock Analysis Report
 
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