Hypersonics to Drones: Kratos' Growing Ground in Missile Defense

The rising demand for advanced missile systems worldwide, driven by growing defense budgets and the rapid modernization of military arsenals, is fueling growth opportunities for missile-focused defense contractors. As nations are increasingly investing in varied missile products ranging from hypersonic weapons to multi-use aerial targets, Kratos Defense & Security Solutions KTOS stands to gain from the aforementioned demand trend.

The company’s offerings play a key role in U.S. missile defense initiatives, from enabling real-world testing of hypersonic systems to supplying ground hardware for missile launch platforms.

In recent months, Kratos has strengthened its standing in the missile defense space with notable developments. In May 2025, the company’s Aegis Readiness Assessment Vehicle Type B (ARAV-B) medium-range ballistic missile target was successfully launched and intercepted during NATO’s Formidable Shield 25 exercise, highlighting the reliability of its threat-representative targets.

Moreover, in March, Kratos broke ground on its 68,000-square-foot Hypersonic System Indiana Payload Integration Facility in Crane, IN. This $50 million project will support payload integration and testing for the MACH-TB hypersonic testbed program. In the same month, Kratos secured a $3.4 million U.S. Navy contract to continue logistics and engineering support for its widely deployed BQM-177A target drone, which emulates cruise missile threats for U.S. and allied forces.

These recent achievements position Kratos to further strengthen its role as a rising player in the missile defense market.

Other Defense Stocks Riding on Missile Modernization Initiatives

As nations worldwide race to modernize their missile arsenals, prominent missile-focused defense contractors like Lockheed Martin LMT and RTX Corporation RTX are gaining steady momentum through notable contract wins.

In September 2025, Lockheed Martin secured a $9.8 billion contract for the production of 1,970 Patriot Advanced Capability - 3 Missile Segment Enhancement (PAC-3 MSE) interceptors and associated hardware. In August, Lockheed won a $720 million contract for the production of 160 Joint Air-to-Ground Missiles and HELLFIRE missiles.

On the other hand, in August, RTX’s Raytheon unit signed a memorandum of understanding with Diehl Defence to co-produce key elements of the Stinger missile in Europe. Moreover, in July, the company won a $74 million contract to produce RAM Guided Missile Launching Systems for the U.S. Navy.

KTOS’ Price Performance, Valuation and Estimates

Shares of KTOS have gained 203.4% in the past year compared with the industry’s 37.2% growth.

The company shares are trading at a discount, with its forward 12-month Price/Sales being 7.46X compared with its industry’s average of 10.12X.

The Zacks Consensus Estimate for KTOS’ 2025 and 2026 earnings has improved over the past 60 days.

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

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

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