Kratos (KTOS) to Pair Valkyrie With AI in Alliance With Shield
Kratos Defense & Security Solutions, Inc. KTOS recently formed an alliance with Shield AI to merge artificial intelligence (“AI”)-based piloting systems with former’s unmanned aircraft XQ-58 Valkyrie. The alliance aims at promoting unmanned aircraft operations in the absence of GPS and communications.
Rationale Behind the Alliance
The integration of AI algorithms with unmanned vehicle will allow better management of complex task leading to overall operational efficiency and capability of unmanned vehicles. Also, the continuous monitoring of changing condition in a mission would provide more security for uncrewed jets.
Real-time data analysis by the AI encourages trajectory optimization, reducing the operational cost of an unmanned vehicle. AI Pilots enabled jet to carry out tactical missions without GPS and communications interference, thus ensuing optimal safety of jets.
With that being said, the integration of Kratos’s Valkyrie XQ-58 with AI pilot would bring about a revolution in the unmanned aerial vehicle (UAV) segment of the defense landscape and would certainly meet the needs of changing dynamics of warfare capabilities. This would result in the steady flow of contracts for Kratos, thus boosting its revenue-generation prospects from the unmanned vehicle businesses.
Growth Prospects
Ongoing technology advancement needs in carrying out combat missions is fueling a rapid increase in defense spending by nations across the globe. In such a scenario, increased spending on autonomous capabilities like UAV has been witnessed and will likely gain more traction in the days ahead.
Per the report from Markets and Markets, the UAV market is poised to witness a CAGR of 7.9% over 2022-2027 period. This reflects on expanding market opportunities for companies like KTOS that enjoy an established position in the UAV manufacturing.
In this context, it is imperative to mention that Kratos manufactures nearly 150 jet drones annually, thus entailing significant demand and order line up from United States Air Force, Navy, Army, Marine Corps and others. The pairing of AI pilot with its Valkyrie would unlock strategic benefits for KTOS by staying at the forefront of innovation. Other defense majors that may benefit from the increasing demand for UAV’s are:
Northrop Grumman NOC: It is a leader in autonomous systems and offers an impressive portfolio of UAVs. Some products include Global Hawk, MQ-4C Triton, Future Autonomous Air, etc
Northrop has a long-term earnings growth rate of 3.8%. Its investors have gained 3.4% in the past month.
Lockheed MartinLMT: It has been delivering advanced autonomous systems to the U.S. military and allies to the requirements of most demanding missions. Its UAV product range includes Indago 3, MATRIX Technology, Stalker, etc.
Lockheed Martin’s long-term earnings growth rate is 6.2%. Shares of LMT have returned 9.6% value to investors in the past year.
Boeing (BA): Its full range of unmanned aerial systems offer intelligent, persistent and efficient solutions for a range of customers and missions worldwide. Its product include ScanEagle, Integrator, MQ-25.
Boeing boasts a long-term earnings growth rate of 4%. Shares of BA have increased 60.8% in the past year.
Price Movement
In the past three months, shares of Kratos have increased 3.8% compared with the industry’s growth of 2.6%.
Image Source: Zacks Investment Research
Zacks Rank
Kratos currently carries 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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