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Kratos Defense (KTOS) Q2 Earnings Match Estimates, Rise Y/Y

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Shares of Kratos Defense & Security Solutions, Inc. (KTOS - Free Report) declined 8.1% to reach $24.92 on Aug 9, following its second-quarter results.

The company reported second-quarter 2021 adjusted earnings of 6 cents per share, which came in line with the Zacks Consensus Estimate. The bottom-line figure, however, improved 20% from the prior-year quarter.

Kratos Defense reported GAAP earnings of a penny against loss of a penny incurred in the second quarter of 2020.

Total Revenues

Total revenues amounted to $205.1 million, surpassing the Zacks Consensus Estimate of $199 million by 2.3% and increasing 20.4% from $170.4 million reported in the year-ago quarter. The year-over-year upside was led by organic growth in Kratos’ Unmanned Systems, Space, Satellite and Cyber, Rocket Support Systems and Microwave Electronics businesses.

Operational Update

Kratos’ operating expenses were $120 million in the quarter compared with $43.1 million in the prior-year quarter. Selling, general and administrative expenses were up 8.9%, while research and development expenses surged 70% year over year.

Kratos reported second-quarter 2021 operating income of $3.3 million, reflecting an increase of 13.8% from second-quarter 2020.

The company’s book-to-bill ratio for the second quarter of 2021 was 0.4 to 1.0 and 1.0 to 1.0 for the twelve months ended Jun 27, 2021, with bookings of $227.4 million for the same period.

Total backlog for Kratos at the end of the second quarter of 2021 was $185.4 million, down from $222.4 million at the end of the first quarter of 2021 and up from $175.7 million at the end of the second quarter of 2020.      

Segmental Performance

Unmanned Systems: Net revenues during the second quarter increased 43.6% year over year to $60.3 million.

Government Solutions: Net revenues in the second quarter rose 12.8% year over year to $144.8 million, driven by organic growth in Space, Satellite and Cyber, Rocket Support Systems and Microwave Products businesses. Revenue contribution from the ASC Signal acquisition also boosted this unit’s top line.

Financial Details

As of Jun 27, 2021, cash and cash equivalents were $369.3 million compared with $380.8 million as of Dec 27, 2020.

Long-term debt, including net of current portion, totaled $300.3 million as of Jun 27, 2021, down slightly from $301 million as of Dec 27, 2020.

As of Jun 27, 2021, cash generated from operating activities was $22 million compared with $10.8 million in the prior-year period.

Guidance

For third-quarter 2021, Kratos expects to generate revenues in the range of $195-$205 million. The Zacks Consensus Estimate for third-quarter revenues is pegged at $202.9 million, which lies above the midpoint of the company’s projected range.

For 2021, the company continues to expect revenues in the range of $810-$850 million. The Zacks Consensus Estimate for full-year revenues is pegged at $834 million, which lies above the midpoint of the company’s projected range.

Zacks Rank

Kratos currently carries a Zacks Rank #4 (Sell).

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

Other Defense Releases

Curtiss-Wright (CW - Free Report) reported second-quarter 2021 adjusted earnings of $1.56 per share, which surpassed the Zacks Consensus Estimate of $1.53 by 2%.

Raytheon Technologies’ (RTX - Free Report) second-quarter 2021 adjusted earnings per share of $1.23 outpaced the Zacks Consensus Estimate of 92 cents by 33.7%.

Hexcel Corporation (HXL - Free Report) reported second-quarter 2021 adjusted earnings of 8 cents per share, which surpassed the Zacks Consensus Estimate of a penny.

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