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Kratos' (KTOS) Q1 Earnings Beat Estimates, Revenues Rise Y/Y

Zacks Equity Research

Kratos Defense & Security Solutions, Inc. KTOS reported first-quarter 2020 adjusted earnings of 9 cents per share, which exceeded the Zacks Consensus Estimate of 6 cents by 50%. The bottom-line figure, however, declined 18.2% from 11 cents reported in the prior-year quarter.

Total Revenues

Total revenues amounted to $168.9 million, surpassing the Zacks Consensus Estimate of $165 million by 2.4% and increasing 5.3% from $160.4 million reported in the year-ago quarter. The year-over-year upside was led by higher product sales and service revenues.

Operational Update

Kratos’ operating expenses amounted to $41.1 million in the quarter compared with $36.7 million in the prior-year quarter. Selling, general and administrative expenses were up 9.8%, while research and development expenses surged 46.2%.

Kratos reported first-quarter 2020 operating income of $4.7 million, reflecting a decrease of 42.7% from first-quarter 2019.

The company reported first-quarter 2020 bookings of $213.1 million and a book-to-bill ratio of 1.3 to 1.0. Backlog as of Mar 29, 2020, was $646.8 million, up 7.6% from the backlog on Dec 29, 2019.

Segmental Performance

Unmanned Systems: Net revenues during the first quarter increased 20.3% year over year to $42 million.

Government Solutions: Net revenues in the first quarter rose 1.1% year over year to $126.9 million.

Kratos Defense Security Solutions Inc Price, Consensus and EPS Surprise

Kratos Defense Security Solutions Inc Price, Consensus and EPS Surprise

Kratos Defense Security Solutions Inc price-consensus-eps-surprise-chart | Kratos Defense Security Solutions Inc Quote

Financial Details

As of Mar 29, 2020, cash and cash equivalents were $158.6 million compared with $172.6 million as of Dec 29, 2019.

Long-term debt, including net of current portion, totaled $295.3 million as of Mar 29, 2020, up slightly from $295.1 million as of Dec 29, 2019.

As of Mar 29, 2020, cash generated from operating activities was $4 million compared with $16 million in the prior year’s quarter.

2020 Guidance

For the second quarter of 2020, Kratos expects revenues of $160-170 million. The Zacks Consensus Estimate for sales is pegged at $190.9 million, which lies above the company’s projected view.

For 2020, the company lowered its revenue guidance from $740-$780 million to $720-$760 million, primarily to reflect the expected impacts of COVID-19 on the business, vendors, suppliers and customers. The Zacks Consensus Estimate for full-year sales is pegged at $756.5 million, which lies above the midpoint of the company’s projected range.

Zacks Rank

Kratos currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Recent Defense Releases

Lockheed Martin Corp. LMT, a Zacks Rank #3 company, 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.

General Dynamics Corporation GD, a Zacks Rank #3 company, reported first-quarter 2020 earnings from continuing operations of $2.43 per share, which missed the Zacks Consensus Estimate of $2.46 by 1.2%. Moreover, earnings declined 5.1% from $2.56 in the year-ago quarter.

Teledyne Technologies Inc. TDY, a Zacks Rank #3 company, reported first-quarter 2020 earnings of $2.28 per share, which surpassed the Zacks Consensus Estimate of $2.10 by 8.6%. The bottom line also improved 12.9% from the year-ago quarter’s $2.02.

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