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Kratos Defense & Security Solutions, Inc. KTOS , with rising earnings estimates, low debt, high liquidity and a rising backlog, offers a great investment opportunity in the Zacks Aerospace Defense Equipment industry.
Let’s focus on the reasons that make this Zacks Rank #2 (Buy) stock an attractive investment pick at the moment.
KTOS’ Growth Projections & Surprise History
The Zacks Consensus Estimate for KTOS’ 2025 earnings per share (EPS) has increased 3.5% to 59 cents in the past 90 days and indicates a 27.9% improvement from the year-ago estimated figure.
The consensus estimate for 2025 total revenues is pinned at $1.28 billion, which indicates growth of 12.2% from the 2024 estimated figure.
The company delivered an average earnings surprise of 70.63% in the last four quarters.
Debt Position of KTOS
Currently, Kratos Defense’s total debt to capital is 11.65%, better than the industry’s average of 54.03%.
Kratos Defense’s times interest earned ratio (TIE) at the end of the third quarter of 2024 was 4.9. The company’s strong TIE ratio indicates that it will be able to meet its interest payment obligations in the near term without any problems.
KTOS’ Liquidity
The company’s current ratio at the end of the third quarter of 2024 was 3.22, higher than the industry’s average of 1.43. The ratio, being greater than one, indicates Kratos Defense’s ability to meet its future short-term liabilities without difficulties.
KTOS’ Rising Backlog
Kratos Defense had an excellent backlog of $1.29 billion as of Sept. 29, 2024, up 11.1% from the year-ago quarter’s figure. Such significant backlog trends boost the company's revenue-generating possibilities for the following quarters. KTOS expects to recognize approximately 19% of the total backlog as revenues in 2024, an additional 50% in 2025 and the balance thereafter.
KTOS Stock’s Price Movement
Shares of KTOS have gained 56.7% in the past six months compared with the industry’s 19.5% growth.
Image Source: Zacks Investment Research
Other Stocks to Consider
Other top-ranked stocks from the same industry are Mercury Systems MRCY, AAR Corp. AIR and Leonardo DRS, Inc. DRS. Mercury Systems sports a Zacks Rank #1 (Strong Buy) at present, while AAR Corp. and Leonardo carry a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Mercury Systems has a long-term earnings growth rate of 13.2%. The Zacks Consensus Estimate for MRCY’s fiscal 2025 sales is pinned at $848.9 million, which indicates year-over-year growth of 1.6%.
AAR Corp. delivered an average earnings surprise of 3.90% in the last four quarters. The Zacks Consensus Estimate for AIR’s fiscal 2025 sales is pinned at $2.76 billion, which indicates year-over-year growth of 18.9%.
Leonardo DRS delivered an average earnings surprise of 22.27% in the last four quarters. The Zacks Consensus Estimate for DRS’ 2025 sales is pinned at $3.43 billion, which indicates year-over-year growth of 7.4%.