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Kratos' (KTOS) Q2 Earnings & Revenues Beat Estimates, Up Y/Y

Zacks Equity Research

Kratos Defense & Security Solutions, Inc. KTOS reported second-quarter 2019 earnings of 8 cents per share, which surpassed the Zacks Consensus Estimate of 7 cents by 14.3%. The bottom line also improved from the prior-year quarter’s earnings of 2 cents per share. This year-over-year upside can be attributed to robust sales, which in turn positively impacted quarterly earnings.

Total Sales

Net sales totaled $187.9 million, which exceeded the Zacks Consensus Estimate of $178 million by 5.6% and increased 24.3% from the year-ago quarter’s $151.2 million.

Operational Update

Kratos’ operating expenses amounted to $35.5 million in the quarter compared with the prior-year quarter’s $34.4 million. Selling, general and administrative expenses were up 8.3%, while research and technology expenses rose 25%.

Kratos reported second-quarter 2019 operating income of $9 million, reflecting a surge of 246.2% from the second quarter of 2018.

Kratos reported second-quarter 2019 bookings of $188.1 million and a book-to-bill ratio of 1.0 to 1.0, with a backlog of $620.3 million as on Jun 30, 2019.

Segmental Performance

Unmanned Systems: Net sales during the second quarter increased 19.4% year over year to $42.5 million.

Government Solutions: Net sales in the second quarter increased 25.8% year over year to $145.4 million.

Financial Details

As of Jun 30, 2019, cash and cash equivalents were $176.2 million compared with $182.7 million as of Dec 31, 2018.

Long-term debt, including net of current portion, totaled $294.6 million as of Jun 30, 2019, up from $294.2 million as of Dec 31, 2018.

At the end of first-half 2019, cash generated from operating activities summed $20 million compared to $1.4 million in the first half of 2018.

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

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

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

Q3 & 2019 Guidance

For the third quarter of 2019, Kratos continues to expect revenues of $175-185 million. The Zacks Consensus Estimate for the company’s third-quarter sales pegged at $193.6 million lies above the mid-point of the company’s projected view. It also expects adjusted EBITDA to be $16-$18 million.

For full-year 2019, Kratos now expects revenues of $720-740 million. The Zacks Consensus Estimate for full-year sales pegged at $737.3 million lies above the mid-point of the company’s projected view.

Kratos has reaffirmed its full-year 2019 cash flow from operations guidance of $40-$50 million and capital expenditures of $28-$30 million.

Zacks Rank

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

Recent Defense Releases

Textron Inc. TXT reported second-quarter 2019 earnings from continuing operations of 93 cents per share, which surpassed the Zacks Consensus Estimate of 85 cents by 9.4%. The bottom line also increased 6.9% from 87 cents in the year-ago quarter.

Lockheed Martin Corp. LMT reported second-quarter 2019 earnings of $5 per share, which surpassed the Zacks Consensus Estimate of $4.74 by 5.5%. The bottom line also improved 23.5% from $4.05 in the year-ago quarter.

Northrop Grumman Corporation NOC reported second-quarter 2019 earnings of $5.06 per share, which surpassed the Zacks Consensus Estimate of $4.64 by 9%. The bottom line also increased 12% from $4.50 reported in the year-ago quarter.

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