What Happened?
Shares of aerospace and defense company Kratos (NASDAQ: KTOS) jumped 8.6% in the morning session after it reported strong second-quarter financial results that beat Wall Street estimates and raised its full-year guidance. The defense contractor reported second-quarter revenue of $351.5 million, a significant 17.1% increase year-over-year, handily beating analyst projections of $305.5 million. Adjusted earnings per share came in at $0.11, also surpassing market estimates of $0.09. Bolstered by these results, the company raised its full-year revenue forecast to a midpoint of $1.3 billion. Although shares initially fell after the report, likely due to weaker-than-expected guidance for the next quarter, investors have since shifted their focus to the strong quarterly performance and the improved full-year outlook.
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What Is The Market Telling Us
Kratos’s shares are very volatile and have had 29 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 11 days ago when the stock dropped 3.2% as reports indicated the German armed forces were preparing to develop long-range combat drones with the company's involvement. The report stated that Germany’s air force sent a request for these drones, capable of striking deep in enemy territory, and that Kratos was contributing to a concept alongside Airbus Defence. This news built on a series of positive developments for the company's flagship Valkyrie drone. Recently, the U.S. Marines transitioned a version of the Valkyrie into a program of record, which established a formal path to full-scale production. The consistent progress and key partnerships prompted positive reactions from analysts, with Stifel having previously raised its price target on the stock, citing the growing momentum.
Kratos is up 146% since the beginning of the year, and at $65 per share, has set a new 52-week high. Investors who bought $1,000 worth of Kratos’s shares 5 years ago would now be looking at an investment worth $3,370.
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