Kratos Defense Stock Rises 35.3% in a Month: Here's How to Play

Kratos Defense & Security Solutions, Inc. KTOS shares have rallied 35.3% in the past month compared with the Zacks Aerospace-Defense Equipment industry’s growth of 15.3%. Contract wins and growing demand for unmanned, autonomous tactical systems are driving strong interest in Kratos Defense’s drone and defense technologies.
 

Other defense equipment stocks, such as CurtissWright CW and AAR Corporation AIR, have also increased in the last month. Shares of CurtissWright and AAR have gained 8.1% and 19.1%, respectively, during the same time frame.

Considering Kratos Defense’s outperformance compared with its industry, investors might be left wondering if this is a good time to add KTOS stock to their portfolio. Let's examine the factors that contributed to the share price gain and assess the stock's investment prospects to make an informed decision.

Factors Driving KTOS Stock

Kratos Defense is one of the leading providers of unmanned aerial target drones for U.S. and allied militaries, with its strong reputation and proven technology driving consistent contract wins, strategic partnerships, global expansion and long-term competitiveness.

Kratos Defense is set to benefit meaningfully from this development as its Valkyrie UAS becomes a core platform in the U.S. Marine Corps’ Collaborative Combat Aircraft program led by Northrop Grumman. The partnership also accelerates operational deployment, improving near-to-medium-term cash flow visibility and enhancing investor confidence in KTOS’ long-term defense growth prospects.

In December 2025, Kratos Defense announced the successful completion of factory acceptance testing between its EPOCH Command and Control (C2) software and Airbus’ OneSat next-generation software-defined satellite platform. This strengthens the company’s position in the growing software-defined space segment, validates its technology for managing highly dynamic, reconfigurable satellites and paves the way for operational use. 

During the same month, Kratos Defense received nearly $30 million in Air Defense and C5ISR system national-security-related, military-grade custom hardware production contracts. This helps the company boost near-term revenues while expanding its involvement in high-priority national security programs.

In the same month, Kratos Defense announced the opening of its new state???of???the???art 10,000 square foot facility for PT6A and PT6T engine overhaul in Vancouver, British Columbia. This helps the company in expanding and strengthening its maintenance, repair and overhaul (“MRO”) capabilities for PT6A and PT6T engines, which are widely used in helicopters and fixed-wing aircraft. The expansion also broadens Kratos Defense’s service portfolio by positioning it to support additional engine models in the future, strengthening customer relationships and helping grow long-term revenues and market presence.

Challenges Faced by KTOS

Although Kratos Defense shows notable growth prospects, it continues to face certain obstacles. One such obstacle is disruptions to the supply chain, arising from raw material shortages, which continue to impact the defense sector as a whole and might affect the company's operations.

Estimates for KTOS Stock

The Zacks Consensus Estimate for KTOS’ 2026 earnings per share (EPS) indicates an increase of 38.43% year over year. The Zacks Consensus Estimate for 2026 sales indicates an improvement of 19.91% year over year.
 

The Zacks Consensus Estimate for CurtissWright’s 2026 EPS indicates an increase of 11.72% year over year. CW’s long-term (three to five years) earnings growth rate is 14.54%. The consensus estimate for AAR’s fiscal 2026 EPS indicates an increase of 16.21% year over year.

KTOS’ Earnings Surprise History

The company beat on earnings in each of the trailing four quarters, delivering an average surprise of 29.17%.

KTOS Stock’s ROIC

The image below shows that KTOS stock’s trailing 12-month return on invested capital (ROIC) lags the peer group’s average. This suggests that the company's investments are not yielding sufficient returns to cover its expenses.

KTOS Stock Trades at a Discount

In terms of valuation, KTOS’ forward 12-month price/book (P/B) is 8.87X, a discount to the industry’s average of 17.01X.

What Should an Investor Do?

Kratos Defense is strengthening its growth outlook through leadership in unmanned systems, validation of its Valkyrie UAS in a key Marine Corps program, and expanding roles in defense, space and aviation markets. Recent contract wins, technology milestones, and facility expansion support near-term revenue growth while reinforcing long-term competitiveness.

However, given its poor ROIC and recent challenges, new investors may wait for a better entry point. Those who already have this Zacks Rank #3 (Hold) stock in their portfolio may continue to retain it, considering the company’s impressive earnings growth projection. 

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
 

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

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

Zacks Investment Research