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Bull Of The Day: Kratos Defense (KTOS)

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Kratos Defense (KTOS - Free Report) is a Zacks Rank #1 (Strong Buy) and is the Bull of the Day.  Clearly there are lots of stocks out there with positive earnings estimate revisions, but I chose this one becuase it has a super solid chart. Right now, I want stocks that have strong charts which implies that investors are not willing to sell them even in rough patches.


Kratos Defense & Security Solutions, Inc. is a specialized National Security Technology business providing mission critical products, services and solutions for United States National Security priorities. Kratos' core capabilities are sophisticated engineering, manufacturing and system integration offerings for National Security platforms and programs.

Earnings History

I see a great history of beating the number for KTOS, with each of the last four reports coming in ahead of the Zacks Consensus Estimate. The average positive earnings surprise is 154% -- so they are destroying the number on a regular basis.


Estimates are actually a little flat here, with the current quarter holding at 7 cents and next quarter holding at 10 cents. The full year saw an increase of 2 cents, but that is actually beyond the 60 day time frame the rank focuses on, so that move should not count.

A healthy 6 cent increase for 2020 is the move that I see impacting the rank the most… and it comes with 4 revisions all in agreement, so that really helps the cause.


So the valuation is stiff here, with a 66x forward PE and a 4.6x book multiple. I see 12% topline growth and I was really expecting more. Operating margins are moving higher, but at only 3.5% we would need to see big revenue growth to make a meaningful impact on EPS.


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