KTOS or LHX: Which Stock Stands Stronger in Today's Defense Boom?

As global defense spending rises amid geopolitical tensions, companies like Kratos Defense & Security Solutions, Inc. KTOS and L3Harris Technologies, Inc. LHX are gaining increased attention from investors. Growing investments in unmanned systems, satellite communications, cyber defense and advanced weapon systems position both firms to benefit from the defense industry’s ongoing expansion.

Kratos focuses on unmanned systems like tactical drones, space, propulsion, hypersonics and microwave electronics. On the other hand, L3Harris is a diversified defense contractor with a strong presence in communication systems, space, electronic warfare and tactical networks. With larger-scale operations, LHX plays a key role in delivering integrated solutions across multiple defense domains.

As countries enhance their defense capabilities with next-gen technologies, both KTOS and LHX are well-placed to benefit. Now, let’s take a closer look to determine which of these stocks presents a stronger investment case.

Key Takeaways for KTOS

Recent Achievements: Kratos ended the second quarter of 2025 with robust revenues. The company reported year-over-year revenue growth of 17.1%. It also increased its revenue guidance for 2025, from $1.26-$1.29 billion to $1.29-$1.31 billion.

Among more recent achievements, worth mentioning are Kratos’ partnership, signed in July 2025, with Champion Tire to debut driverless truck platooning at NASCAR, showcasing its defense-to-commercial autonomous technology for logistics and proving its scalability in high-speed real-world operations.

In June, Kratos announced plans to open a new advanced manufacturing facility in Bristow, OK, to produce its GEK turbojet engine family with an initial focus on the GEK800, strengthening its position in defense and aerospace propulsion.

Such enhanced revenue guidance, along with manufacturing facility expansion, reflects soaring demand for KTOS’ products.

Financial Stability: Kratos ended the second quarter of 2025 with cash and cash equivalents of $784 million, up from $329 million at the end of 2024. Its long-term debt stood at $233 million with no significant near-term maturities, suggesting this stock’s strong financial position. This could boost the company's ability to reliably fund its ongoing operations and future growth plans.

Challenges to Note: Alike other defense stocks, Kratos is also dealing with persistent supply-chain constraints, particularly limited access to raw materials. The company also faces labor shortages and rising inflationary costs, which may pressure margins and delay project execution. Moreover, potential changes in U.S. defense budgets or spending policies could restrict the pipeline of new contracts.

Key Takeaways for LHX

Recent Achievements: L3Harris ended second-quarter of 2025 on a solid note, with 15.8% year-over-year growth in earnings per share and 2.4% rise in revenues. The company also raised its revenue and earnings guidance for 2025.
More recently, L3Harris completed a $100 million expansion at its satellite integration and test facility in Palm Bay this month, enhancing Space Coast capabilities to support the Department of Defense’s Golden Dome program and ensuring the timely delivery of critical components.

In the same month, L3Harris launched the advanced Navigation Technology Satellite-3 (NTS-3) from Cape Canaveral on a ULA Vulcan rocket, marking the Department of Defense’s first experimental navigation satellite in nearly 50 years and the first fully reprogrammable PNT system designed to provide warfighters with flexible and resilient mission support.

These announcements are indicative of the soaring product demand that LHX is experiencing, which, in turn, is driving significant investment and successful deployment of advanced technology.

Financial Stability: L3Harris ended the second quarter of 2025 with cash and cash equivalents of $0.48 billion compared with $0.62 billion at the end of 2024. Its long-term debt stood at $10.98 billion, while its current debt was pinned at $1.13 billion. This indicates a relatively weak financial position, which could limit the company's ability to reliably fund its ongoing operations and future growth plans.

Challenges to Note: L3Harris continues to face labor shortages, a challenge faced by other players in the aerospace-defense sector, due to an aging workforce and higher-than-average attrition among younger employees. This shortage increases the risk of production delays and quality issues for LHX. With aircraft manufacturers raising production levels, these workforce constraints may make it harder for L3Harris to meet delivery timelines and impact its operating performance.

How do EPS Estimates Compare for KTOS & LHX?

The Zacks Consensus Estimate for KTOS’ 2025 earnings per share (EPS) is pegged at 51 cents, indicating year-over-year growth of 4.1%. The consensus estimate for revenues is pinned at $1.31 billion, implying growth of 15.2%. The company’s near-term EPS estimates reflect mixed movement over the past 60 days.

For LHX, the Zacks Consensus Estimate for 2025 EPS is pegged at $10.50, indicating year-over-year decline of 19.9%. Its consensus estimate for revenues is pinned at $21.75 billion, showing growth of 2%. The company’s 2025 and 2026 EPS estimates have moved north over the past 60 days.

Stock Price Performance: KTOS vs. LHX

KTOS has outperformed LHX over the past year. Shares of KTOS gained 195.4% compared with LHX’s 20.4% growth.

LHX’s Valuation More Attractive Than KTOS

KTOS shares trade at a forward 12-month Price/Sales (P/S F12M) multiple of 7.73X compared with LHX’s P/S F12M of 2.28X, making LHX relatively more attractive from a valuation standpoint.

Conclusion

Both Kratos and L3Harris are positioned to capture growth from rising defense budgets and modernization efforts. However, Kratos shows stronger momentum with earnings estimates implying year-over-year growth, strong financial position and better share price performance.

L3Harris, with its larger scale, diversified portfolio and favorable valuation, offers a more stable investment option for those seeking long-term reliability. Still, for investors looking at growth and momentum, Kratos currently appears more attractive.

Both KTOS and LHX carry a Zacks Rank #3 (Hold). You can see the full list of today’s Zacks Rank #1 (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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