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Investing.com - Benchmark raised its price target on Kratos Defense & Security (NASDAQ:KTOS) to $48.00 from $40.00 on Monday while maintaining a Buy rating on the defense contractor’s shares.
The research firm cited the Defense Budget Reconciliation Bill, which includes approximately $600 million in incremental funding for programs related to Kratos. Specifically, the Senate Armed Services Reconciliation bill allocates $270 million for Marine Corps unmanned combat aircraft and $400 million for the Multi-Service Advanced Capability Hypersonic Test Bed. With a market capitalization of $6.6 billion and a healthy current ratio of 2.84, InvestingPro data shows Kratos is well-positioned to execute these contracts.
Kratos has been working with the Marines on the Valkyrie drone since 2022 and expanded this relationship with a $35 million contract in January 2025. The $270 million funding increase could potentially support orders for 30-50 aircraft, depending on allocations.
In January, Kratos also secured a five-year $1.45 billion MACH-TB 2.0 contract for hypersonic testing, with the additional $400 million funding now arriving ahead of expected timelines. The firm noted that increasing use of hypersonics to bypass traditional air defense systems will be a feature of future combat scenarios.
The President’s bill is expected to be signed in July, with recent Iranian engagements highlighting Kratos’s positioning within future combat scenarios involving hypersonics, long-distance munitions, drones, and intelligence, surveillance, and reconnaissance (ISR) capabilities. InvestingPro forecasts 13% revenue growth for FY2025, with 15+ additional ProTips available to subscribers through the platform’s comprehensive analysis tools.
In other recent news, Kratos Defense & Security Solutions reported a strong financial performance for the first quarter of 2025, with revenues reaching $302.6 million, surpassing the estimated range of $285 million to $295 million. The company’s adjusted EBITDA also exceeded expectations, coming in at $26.7 million. Kratos has entered into a significant teaming agreement with GE Aerospace to advance propulsion technologies for unmanned aerial systems and Collaborative Combat Aircraft-type aircraft. This partnership aims to develop and produce affordable, high-performance propulsion systems, including the GEK800 Engine. Kratos shareholders recently approved all nominated board members and ratified Deloitte & Touche LLP as the independent auditor for the fiscal year ending December 28, 2025. The company anticipates continued growth driven by its hypersonic franchise and expects organic revenue growth of 10% for the remainder of 2025. The collaboration between Kratos and GE Aerospace is expected to meet the evolving needs of the defense sector, enhancing the production of cost-effective engines for unmanned platforms.
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