Kratos Defense Secures a Navy Contract for XQ-58A Unmanned Combat Jets
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Kratos Defense & Security Solutions, Inc. KTOS recently won a modification contract involving the XQ-58A Unmanned Aerial System (“UAS”). The award has been provided by the Naval Air Warfare Aircraft Division, Patuxent River, MD.
Details of KTOS’ New Deal
Valued at $34.9 million, the contract is scheduled to be completed by September 2026. Per the terms of the deal, Kratos Defense will offer non-recurring engineering support for XQ-58A UAS mission systems and subsystem integration for the Marine Corps. This modification also requires KTOS to provide flight tests, spares and other associated materials.
The majority of the work related to the deal will be carried out in Sacramento, CA, and Oklahoma City, OK.
What’s Lies Ahead for KTOS?
Increasing geopolitical tensions worldwide lately, such as the Russian invasion of Ukraine and the ongoing conflict in the Middle East, have prompted nations to strengthen their defense systems manifold. With rapid technological upgrades, UAS has steadily become pivotal in a nation’s defense strategy. UAS demand has also been gaining momentum of late due to its low-cost feature, coupled with the zero-mortality rate and excellent surveillance abilities.
Per a report by the Mordor Intelligence firm, the Military Unmanned Aerial Vehicles (“UAV”) market is projected to witness a CAGR of 11.7% during 2024-2029. This reflects expanding market opportunities for companies like KTOS, which enjoy a well-established position in the UAV market.
Its XQ-58 Valkyrie is a stealthy unmanned combat aerial vehicle and provides an affordable, significantly lower cost/weight solution as an unmanned escort. It can also serve as a loyal wingman, conduct single UAS operations or operate in swarms.
Moreover, Kratos has a diverse portfolio of other tactical UAVs, including UTAP-22 Mako, X-61A Gremlin and aerial target drones like BQM-167A, BQM-177A and MQM-178 Firejet. 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. The latest contract win is a bright example of that.
Prospects for KTOS Peers
Other defense majors that may benefit from the increasing demand for UAVs are as follows:
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, MQ-28 and MQ-25.
Boeing has a long-term (three to five years) earnings growth rate of 19.3%. The Zacks Consensus Estimate for BA’s 2025 sales suggests growth of 23.4% from the prior-year reported figure.
Lockheed Martin LMT: It delivers 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 4, Stalker and a few more.
Lockheed boasts a solid long-term earnings growth rate of 4.6%. The consensus estimate for LMT’s 2024 sales indicates a 5.5% improvement from the prior year's reported figure.
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, Bat Unmanned Air System, NATO Alliance Ground Surveillance and Manta Ray.
NOC boasts a solid long-term earnings growth rate of 19.1%. The Zacks Consensus Estimate for its 2024 sales indicates year-over-year growth of 5.3%.