What Happened?
Shares of aerospace and defense company Kratos (NASDAQ: KTOS) jumped 4.4% in the morning session after several Wall Street firms raised their price targets and one initiated coverage with a 'buy' rating, citing a strong quarterly performance and positive future outlook. The wave of positive analyst ratings follows the company's strong second-quarter earnings report, where it beat Wall Street's expectations with a profit of $0.11 per share on revenue of $351.5 million. Kratos also boosted its revenue guidance for the full year. This optimism is further supported by news that its XQ-58 Valkyrie uncrewed aircraft is poised to become a program of record with the U.S. Marine Corps, signaling potential future orders. In response to these developments, B. Riley raised its price target to $72, Noble Capital increased its target to $75, and Canaccord Genuity initiated its coverage with a 'buy' rating and a $74 price target.
After the initial pop the shares cooled down to $65.43, up 2.5% from previous close.
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What Is The Market Telling Us
Kratos’s shares are extremely volatile and have had 30 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 3 days ago when the stock gained 8.6% on the news that it reported strong second-quarter financial results that beat Wall Street estimates and raised its full-year guidance. The defense contractor reported second-quarter revenue of $351.5 million, a significant 17.1% increase year-over-year, handily beating analyst projections of $305.5 million. Adjusted earnings per share came in at $0.11, also surpassing market estimates of $0.09. Bolstered by these results, the company raised its full-year revenue forecast to a midpoint of $1.3 billion. Although shares initially fell after the report, likely due to weaker-than-expected guidance for the next quarter, investors have since shifted their focus to the strong quarterly performance and the improved full-year outlook.
Kratos is up 148% since the beginning of the year, and at $65.43 per share, has set a new 52-week high. Investors who bought $1,000 worth of Kratos’s shares 5 years ago would now be looking at an investment worth $3,392.
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