Kratos (KTOS) Clinches Modification Contract for BQM-177A
Kratos Defense & Security Solutions, Inc. KTOS recently announced that its Unmanned Systems division has secured a modification contract involving its BQM-177A aerial target drones. The award has been provided by the U.S. Navy.
The contract is valued at $57.7 million. Per the terms of the deal, Kratos will manufacture and supply 70 BQM-177A Surface Launched Aerial Targets and 70 Rocket-Assisted Takeoff attachment kits. The company is also responsible for providing related technical and administrative data to support the U.S. Navy’s weapons system testing, evaluation and fleet training.
What’s Favoring Kratos?
Amid consistently augmenting spending on military arms and ammunition and other warfare needs, increased funding for autonomous capabilities like unmanned aerial vehicles (UAV) is being witnessed lately. This tends to benefit Kratos as its diverse portfolio of tactical UAVs includes XQ-58A Valkyrie, UTAP-22 Mako, X-61A Gremlin and aerial target drones like BQM-167A, BQM-177A and MQM-178 Firejet. The latest contract win is a bright example of that.
The BQM-177A, distinguished by its subsonic aerial operational capabilities, is designed to support a variety of missions and enhance the U.S. Navy’s preparedness for contemporary and future combat scenarios.
Due to affordability, survivability, long-range, high-subsonic speeds, maneuvrability and ability to carry flexible mission kit configurations, KTOS may continue to lock in such orders in the days ahead involving UAVs. Such orders should boost the company’s revenue generation prospects.
Growth Prospects
Due to the significant interest of the military in UAVs and the growing focus on increasing spending on this segment, we may expect the UAV market to be on an impressive growth trajectory. In this context, per the report from Expert Market Research firm, the global UAV market is expected to grow at a CAGR of 16.5% during 2024-2032.
This reflects expanding market opportunities for companies like KTOS that enjoy a well-established position in the UAV market. Other defense majors that may benefit from the expanding UAV market are as follows:
Lockheed Martin LMT: The company has a vast portfolio of autonomous systems, including Indago 4, MORFIUS, Stalker Unmanned Aircraft System (UAS) etc. LMT’s business unit Sikorsky’s MATRIX technology is an aircraft autonomy system that will one day enable helicopters to resupply forward forces on the future battlefield without any human pilots or crew on board.
LMT boasts a long-term (three-to-five years) earnings growth rate of 4.2%. The Zacks Consensus Estimate for 2024 sales implies an improvement of 2.4% from the prior-year figure.
Northrop Grumman NOC: It is a leader in autonomous systems and offers an impressive portfolio of UAVs, which include Global Hawk, MQ-4C Triton, Fire Scout, Bat unmanned aircraft system etc. In November 2023, Australia’s multi-intelligence MQ-4C Triton completed its first flight. Australia has placed an order for four such UAS. During 2023, NOC secured $1.5 billion as awards for Triton.
NOC boasts a long-term earnings growth rate of 10.1%. The Zacks Consensus Estimate for 2024 sales implies an improvement of 4.6% from a year ago.
BAE Systems BAESY: Its PHASA-35, an ultra-lightweight, solar-electric High Altitude Pseudo Satellite UAS, completed its successful flight trial in June 2023. It offers an alternative and flexible approach to conventional systems, such as satellites or conventionally powered aircraft, for the provision of persistent and cost-effective imagery and communications. Taranis and DEMON are also UAVs produced by BAESY.
BAESY boasts a long-term earnings growth rate of 12.9%. The Zacks Consensus Estimate for 2024 sales implies an improvement of 34.1% from the year-ago figure.
Price Performance
In the past year, shares of KTOS have rallied 32.6% compared with the industry’s 31.1% growth.
Image Source: Zacks Investment Research
Zacks Rank
Kratos currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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