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Kratos (KTOS) Up 27.3% Since Last Earnings Report: Can It Continue?
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It has been about a month since the last earnings report for Kratos (KTOS - Free Report) . Shares have added about 27.3% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Kratos due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Kratos Defense & SecuritySolutions reported first-quarter 2020 adjusted earnings of 9 cents per share, which exceeded the Zacks Consensus Estimate of 6 cents by 50%. The bottom-line figure, however, declined 18.2% from 11 cents reported in the prior-year quarter.
Total Revenues
Total revenues amounted to $168.9 million, surpassing the Zacks Consensus Estimate of $165 million by 2.4% and increasing 5.3% from $160.4 million reported in the year-ago quarter. The year-over-year upside was led by higher product sales and service revenues.
Operational Update
Kratos’ operating expenses amounted to $41.1 million in the quarter compared with $36.7 million in the prior-year quarter. Selling, general and administrative expenses were up 9.8%, while research and development expenses surged 46.2%.
Kratos reported first-quarter 2020 operating income of $4.7 million, reflecting a decrease of 42.7% from first-quarter 2019.
The company reported first-quarter 2020 bookings of $213.1 million and a book-to-bill ratio of 1.3 to 1.0. Backlog as of Mar 29, 2020, was $646.8 million, up 7.6% from the backlog on Dec 29, 2019.
Segmental Performance
Unmanned Systems: Net revenues during the first quarter increased 20.3% year over year to $42 million.
Government Solutions: Net revenues in the first quarter rose 1.1% year over year to $126.9 million.
Financial Details
As of Mar 29, 2020, cash and cash equivalents were $158.6 million compared with $172.6 million as of Dec 29, 2019.
Long-term debt, including net of current portion, totaled $295.3 million as of Mar 29, 2020, up slightly from $295.1 million as of Dec 29, 2019.
As of Mar 29, 2020, cash generated from operating activities was $4 million compared with $16 million in the prior year’s quarter.
2020 Guidance
For the second quarter of 2020, Kratos expects revenues of $160-170 million. The Zacks Consensus Estimate for sales is pegged at $190.9 million, which lies above the company’s projected view.
For 2020, the company lowered its revenue guidance from $740-$780 million to $720-$760 million, primarily to reflect the expected impacts of COVID-19 on the business, vendors, suppliers and customers. The Zacks Consensus Estimate for full-year sales is pegged at $756.5 million, which lies above the midpoint of the company’s projected range.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -62.5% due to these changes.
VGM Scores
Currently, Kratos has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of this revision has been net zero. Notably, Kratos has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Kratos (KTOS) Up 27.3% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for Kratos (KTOS - Free Report) . Shares have added about 27.3% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Kratos due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Kratos' Q1 Earnings Beat Estimates, Revenues Rise Y/Y
Kratos Defense & SecuritySolutions reported first-quarter 2020 adjusted earnings of 9 cents per share, which exceeded the Zacks Consensus Estimate of 6 cents by 50%. The bottom-line figure, however, declined 18.2% from 11 cents reported in the prior-year quarter.
Total Revenues
Total revenues amounted to $168.9 million, surpassing the Zacks Consensus Estimate of $165 million by 2.4% and increasing 5.3% from $160.4 million reported in the year-ago quarter. The year-over-year upside was led by higher product sales and service revenues.
Operational Update
Kratos’ operating expenses amounted to $41.1 million in the quarter compared with $36.7 million in the prior-year quarter. Selling, general and administrative expenses were up 9.8%, while research and development expenses surged 46.2%.
Kratos reported first-quarter 2020 operating income of $4.7 million, reflecting a decrease of 42.7% from first-quarter 2019.
The company reported first-quarter 2020 bookings of $213.1 million and a book-to-bill ratio of 1.3 to 1.0. Backlog as of Mar 29, 2020, was $646.8 million, up 7.6% from the backlog on Dec 29, 2019.
Segmental Performance
Unmanned Systems: Net revenues during the first quarter increased 20.3% year over year to $42 million.
Government Solutions: Net revenues in the first quarter rose 1.1% year over year to $126.9 million.
Financial Details
As of Mar 29, 2020, cash and cash equivalents were $158.6 million compared with $172.6 million as of Dec 29, 2019.
Long-term debt, including net of current portion, totaled $295.3 million as of Mar 29, 2020, up slightly from $295.1 million as of Dec 29, 2019.
As of Mar 29, 2020, cash generated from operating activities was $4 million compared with $16 million in the prior year’s quarter.
2020 Guidance
For the second quarter of 2020, Kratos expects revenues of $160-170 million. The Zacks Consensus Estimate for sales is pegged at $190.9 million, which lies above the company’s projected view.
For 2020, the company lowered its revenue guidance from $740-$780 million to $720-$760 million, primarily to reflect the expected impacts of COVID-19 on the business, vendors, suppliers and customers. The Zacks Consensus Estimate for full-year sales is pegged at $756.5 million, which lies above the midpoint of the company’s projected range.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -62.5% due to these changes.
VGM Scores
Currently, Kratos has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of this revision has been net zero. Notably, Kratos has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.