KTOS vs. NOC: Which Defense Tech Stock Is the Smarter Buy?

As rising global security threats are driving higher defense spending, major defense companies like Kratos Defense & Security Solutions, Inc. KTOS and Northrop Grumman NOC are drawing investor focus. Large companies are investing in autonomous defense technology and military drones, which are essential because they improve intelligence collection, lower human risk in hazardous situations, and increase operational efficiency through real-time data and quicker decision-making.

Drones can eliminate costly military assets, giving a strategic edge by offering less expensive alternatives to conventional forces. In order to make decisions on their own, future drones will depend increasingly on artificial intelligence, and their swarming skills should increase dramatically.

Both companies are deeply involved in developing unmanned aerial vehicles (UAVs), autonomous combat systems, and advanced command-and-control technologies that are reshaping modern military strategy.

The Standpoint of KTOS

In order to replicate the latest enemy fighter aircraft, missiles, and other threats, Kratos Defense provides high-performance, jet-powered unmanned aerial target drone systems. For the U.S. Air Force, Navy, Army, and many other affiliated foreign defense agencies, Kratos Defense is the leading supplier of unmanned aerial target drone systems. Due to this, the company has recently been awarded several contracts and entered into strategic partnerships involving its target drones, which should further strengthen its presence in the global UAS market.

Valkyrie includes the BQM-177, BQM-167, and MQM-178, in addition to other well-known unmanned aerial target drone systems provided by Kratos. The business is currently working on projects including Thanatos, Apollo, Athena, and Air Wolf target drones to increase its presence in the UAS industry. 

Additionally, as the company progresses with this customer-funded initiative, its Athena tactical drone has successfully completed multiple test flights. A new fifth-generation jet drone is presently being developed by Kratos' Ghost Works branch, with a first flight anticipated in the first half of 2026. This product pipeline gives us hope for Kratos' unmanned aerial business' strong organic growth potential.

The Standpoint of NOC

Northrop Grumman's product range is well-positioned in high-priority categories such defense electronics, unmanned aircraft, and missile defense, and the company is well-represented in Air Force, Space, and Cyber Security programs.

With a far broader portfolio that includes stealth bombers, space systems, missile defense, and advanced networking capabilities, Northrop Grumman, on the other hand, is the scaled and diversified powerhouse of military technology. The company is a leader in the premium military technology market because of its expertise in integrating AI-driven autonomy, cutting-edge sensors, and secure communication technologies. Its key projects, like the B-21 Raider stealth bomber, MQ-4C Triton, and RQ-4 Global Hawk, show off its superiority in strategic unmanned and semi-autonomous platforms.

Let's compare the two stocks' fundamentals to determine which one is a better investment option at present.

How Do Zacks Estimates Compare for KTOS & NOC?

The Zacks Consensus Estimate for Kratos Defense’s 2025 and 2026 earnings per share (EPS) has remained unchanged for 2025 and increased 1.41% for 2026 in the past 60 days.
 

The Zacks Consensus Estimate for Northrop Grumman’s EPS has increased 2.44% for 2025 and has declined 0.10% for 2026 in the past 60 days.

Financial Stability of KTOS & NOC

Kratos Defense 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 totaled $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.

Northrop Grumman’s cash and cash equivalents as of Sept. 30, 2025, totaled $1.96 billion, down from $4.35 billion as of Dec. 31, 2024. Its long-term debt (net of the current portion) amounted to $15.16 billion compared with $14.69 billion as of Dec. 31, 2024. Considering this, we may conclude that the company has a weak solvency position.

NOC’s Valuation More Attractive Than KTOS

KTOS shares trade at a forward 12-month Price/Sales (P/S F12M) multiple of 10.11 compared with NOC’s P/S F12M of 1.91, making NOC relatively more attractive from a valuation standpoint.

Debt Position of KTOS & NOC

Currently, KTOS’ total debt to capital is 7.97%, better than NOC’s total debt to capital of 48.67%.

KTOS & NOC’s Price Performance

In the past three months, shares of Kratos Defense and Northrop Grumman have risen 54.2% and 1.5%, respectively.

KTOS or NOC: Which Is a Better Choice Now?

Kratos Defense offers high-growth potential driven by emerging defense trends and expanding autonomous systems budgets, while Northrop Grumman benefits from long-term defense contracts and modernization programs. Both companies stand to benefit from the growing U.S. and allied focus on AI-enabled and autonomous combat systems.

However, our choice at the moment is Kratos Defense, given its better price performance, strong long-term earnings growth, better financial stability and debt management than Northrop Grumman. 

KOTS carries a Zacks Rank #2 (Buy) and NOC has a Zacks Rank #3 (Hold) at present. 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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