Will Segmental Sales Boost Kratos Defense in Q1 Earnings?

Kratos Defense & Security Solutions, Inc. KTOS is set to release first-quarter 2025 results on May 7, 2025, after market close.

The company delivered a trailing four-quarter average earnings surprise of 69.24%. The strong revenue performance across both its business segments is likely to add an impetus to its overall first-quarter results amid the effects of higher bid and proposal costs. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)

Factors Likely to Impact Q1 Results

Solid revenue growth from increased domestic and international target drone production activity is likely to have bolstered the top line of the Unmanned Systems business segment.

Also, contributions from the STS acquisition are likely to have favorably contributed to this unit’s revenue performance.

The Zacks Consensus Estimate for the segment’s quarterly revenues is pegged at $65.6 million, indicating a 10.4% increase from the figure reported a year ago.

Solid revenue growth from the company’s C5ISR and microwave electronics products businesses, hypersonic and ballistic missile target business, as well as turbine technologies, is expected to have bolstered the top line of the Kratos Government Solutions business segment.

However, revenues from this unit’s Space and Satellite business are expected to have been lower, primarily due to industry-related Original Equipment Manufacturers (OEM) delays in the manufacturing and delivery of software-defined satellites. This is expected to have adversely impacted the deployment of KTOS’ commercial satellite ground equipment, thereby affecting the overall top-line performance of the Government business segment.

The Zacks Consensus Estimate for the Government segment’s first-quarter revenues is pegged at $227 million, indicating a 4.2% rise from the year-ago quarter’s reported figure.

Kratos Defense & Security Solutions, Inc. Price and EPS Surprise

Kratos Defense & Security Solutions, Inc. price-eps-surprise | Kratos Defense & Security Solutions, Inc. Quote

Q1 Expectations for KTOS

With both Kratos Defense’s segments expected to report solid top-line improvement, its overall revenue growth prospects remain bright. Moreover, during the first quarter, KTOS acquired certain assets of Norden Millimeter, Inc., which focuses on microwave and millimeter wave products. Positive synergies from this buyout are also likely to bolster the company’s first-quarter operating results.

The Zacks Consensus Estimate for KTOS’ first-quarter revenues is pegged at $292.2 million, which indicates a 5.4% rise from the year-ago quarter’s level.

Such a solid top-line projection is likely to have aided KTOS’ first-quarter bottom line. However, higher bid and proposal costs as well as increased subcontractor and material costs on certain multi-year fixed price contracts are likely to have adversely impacted its overall earnings.

The Zacks Consensus Estimate for first-quarter earnings is pegged at nine cents per share, which indicates a decline of 18.2% from the prior-year reported figure.

What the Zacks Model Unveils for KTOS

Our proven model does not conclusively predict an earnings beat for Kratos Defense this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat, which is not the case here, as you will see below.

Earnings ESP: KTOS has an Earnings ESP of 0.00%. You can uncover the best stocks before they’re reported with our Earnings ESP Filter.

Zacks Rank: Currently, Kratos Defense carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

A Recent Defense Release

Lockheed Martin Corporation LMT reported first-quarter 2025 earnings of $7.28 per share, which beat the Zacks Consensus Estimate of $6.34 by 14.8%. The bottom line increased 15% from the year-ago quarter's reported figure of $6.33 per share.

The company’s net sales were $17.96 billion, which beat the consensus estimate of $17.76 billion by 1.1%. The top line also increased 4.5% from $17.20 billion reported in the year-ago quarter.

Stocks to Consider

Below, we have mentioned players from the same sector that have the right combination of elements to beat on earnings in the upcoming releases.

Axon Enterprise AXON is set to report first-quarter 2025 earnings on May 7, 2025, after market close. It has an Earnings ESP of +9.28% and a Zacks Rank of 1 at present.

The Zacks Consensus Estimate for AXON’s earnings is pegged at $1.27 per share, indicating year-over-year growth of 10.4%. The consensus estimate for its sales is pegged at $589.1 million, indicating year-over-year growth of 27.9%.

CAE CAE is set to report its fiscal fourth-quarter 2025 results on May 13, after market close. It has an Earnings ESP of +4.91% and a Zacks Rank of 3 at present.

The Zacks Consensus Estimate for CAE’s earnings is pegged at 31 cents per share, indicating year-over-year growth of 244.4%. The consensus estimate for its sales is pegged at $906.7 million, indicating year-over-year growth of 8.5%.

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

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