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Kratos (KTOS) Q4 Earnings Miss Estimates, Revenues Rise Y/Y

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Shares of Kratos Defense & Security Solutions, Inc. (KTOS - Free Report) dropped 3.5% to reach $27.50 on Feb 26, reflecting skepticism of investors following the company's lower-than-expected fourth-quarter results.

The company reported fourth-quarter 2020 earnings of 8 cents per share, which missed the Zacks Consensus Estimate of 10 cents by 20%.  The bottom line also declined 11.1% from the prior-year quarter’s earnings of 9 cents per share.

Barring one-time adjustments, the company reported GAAP earnings of 62 cents per share for the fourth quarter of 2020, compared with 3 cents recorded in the year-ago quarter.

For 2020, the company reported adjusted earnings of 33 cents per share, compared with 30 cents in 2019.

 

Total Revenues

Total revenues amounted to $206.4 million in the fourth quarter, which missed the Zacks Consensus Estimate of $219 million by 5.6%. Revenues however improved 11.5% from $185.1 million reported in the year-ago quarter. The year-over-year upside was led by organic growth in Kratos Unmanned Systems, Space and Satellite, Microwave Products, as well as Defense and Rocket Support Systems businesses.

For 2020, the company recorded revenues worth $747.7 million, compared with $717.5 million generated in 2019.

Operational Update

Kratos’ operating expenses amounted to $45.3 million in the quarter compared with the prior-year quarter’s $39.1 million. Selling, general and administrative expenses were up 19.7%, while research and development expenses soared 52%.

The company reported fourth-quarter 2020 operating income of $9 million compared with operating income of $9.3 million for the fourth quarter of 2019.

Kratos reported fourth-quarter 2020 bookings of $254 million and a book-to-bill ratio of 1.2 to 1.0, with a backlog of $922.2 million as of Dec 31, 2020.

Segmental Performance

Unmanned Systems: Revenues during the fourth quarter improved 29.2% year over year to $49.5 million.

Government Solutions: Revenues in the fourth quarter grew 6.9% year over year to $156.9 million.

Financial Details

As of Dec 31, 2020, cash and cash equivalents were $380.8 million compared with $172.6 million as of Dec 31, 2019.

Long-term debt, including net of current portion, totaled $301 million as of Dec 31, 2020, up from $295.1 million as of Dec 31, 2019.

At the end of 2020, cash generated from operating activities was $44.7 million compared with $28.9 million in 2019.

2021 Guidance

For first-quarter 2021, Kratos expects to generate revenues in the range of $185-$195 million. The Zacks Consensus Estimate for first-quarter revenues is pegged at $191.6 million, which lies above the midpoint of the company’s projected range.

For 2021, the company expects revenues in the range of $810-$850 million. The Zacks Consensus Estimate for full-year revenues is pegged at $842.6 million, which lies above the midpoint of the company’s projected range.

Zacks Rank

Kratos currently carries a Zacks Rank #5 (Strong Sell).

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

Other Defense Q4 Releases

Lockheed Martin Corp. (LMT - Free Report) reported fourth-quarter 2020 earnings from continuing operations of $6.38 per share, which came in line with the Zacks Consensus Estimate.

Hexcel Corporation (HXL - Free Report) reported fourth-quarter 2020 loss of 18 cents per share, in line with the Zacks Consensus Estimate.

General Dynamics Corporation (GD - Free Report) reported fourth-quarter 2020 earnings from continuing operations of $3.49 per share, which missed the Zacks Consensus Estimate of $3.55 by 1.7%

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