Should Investors Listen To Analyst Recommendations? Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS)

On 22 August 2k19, Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS) surged by +0.37% with closing price of $19.15 during the normal trading session on Thursday and reaching a high of $25.08 during the day while it closed the day at $11.91. The KTOS stock had a trading volume of 751,549 shares on that day, which is compared to the average daily volume of 1,403,807 shares.

Kratos Defense & Security Solutions, Inc. (KTOS) recently stated its 2nd quarter 2k19 financial results.  For the 2nd quarter 2k19, Kratos stated Revenues of $187.9M and Adjusted EBITDA of $19.2M, or 10.2 percent, a 58.7 percent increase over the Adjusted EBITDA for the 2nd quarter of 2k18.  Kratos stated 2nd quarter 2k19 Operating Income of $9.0M, a 246.2 percent increase over the 2nd quarter of 2k18 and Cash Flow from Operations of $4.0M. 2nd quarter Free Cash Flow from Operations was a use of $1.8M after capital expenditures of $5.8M, which included the continuing build out of the Company’s new drone manufacturing facility in Oklahoma, where the XQ-58 Valkyrie will be produced.  For the 2nd quarter 2k19, Kratos stated Adjusted EPS* of $0.08, a 300.0 percent increase over the 2nd quarter of 2k18, Net Income of $3.9M and GAAP EPS of $0.04, contrast to a 2nd quarter 2k18 Net Loss of $7.7M and GAAP EPS loss of $0.07.

For the 2nd quarter of 2k19, Kratos’ Unmanned Systems Division (KUSD) generated Revenues of $42.5M, a raise of $6.9M or 19.4 percent over 2k18 2nd quarter Revenues of $35.6M.  KUSD 2nd quarter book-to-bill ratio was 1.5 to 1.0, with a funded backlog of $153.4M.   2nd quarter KUSD 2k19 Adjusted EBITDA was $3.5M and Operating Income was $1.7M, contrast to Adjusted EBITDA of $3.7M and Operating Income of $2.0M in the 2nd quarter of 2k18.

For the 2nd quarter of 2k19, Kratos’ Government Solutions Division (KGS) generated Revenues of $145.4M contrast to 2k18 2nd quarter Revenues of $115.6M, a raise of 25.8 percent.  Not Including the impact of the FTT acquisition, KGS Revenues increased organically 10.9 percent, or $12.6M, from the 2nd quarter of 2k18 to the 2nd quarter of 2k19.  2nd quarter 2k19 KGS Adjusted EBITDA of $15.7M increased 86.9 percent over 2nd quarter 2k18 Adjusted EBITDA of $8.4M.  2nd quarter 2k19 KGS Operating Income of $10.7M increased 114.0 percent over 2nd quarter 2k18 Operating Income of $5.0M.

Financial Guidance

Kratos is providing third quarter 2k19 financial guidance of Revenues of $175 to $185M, and Adjusted EBITDA of $16 to $18M.  It is also updating its full year 2k19 financial guidance of Revenues to $720 to $740M, and reaffirming its full year 2k19 guidance of Adjusted EBITDA of $71 to $77M.  Third quarter and full year 2k19 guidance reflect the most recent forecast for Kratos’ business mix, including increased higher profit margin product and solutions work, increased software solutions and reduced legacy hardware sales in our space and satellite business, lower services revenues including in our training solutions business, and the current timing of predictable KGS contract awards.

The Company is reaffirming full year 2k19 Cash Flow from Operations guidance of $40 to $50M, capital expenditures of $28 to $30M, and Free Cash Flow guidance of $10 to $20M, plus the predictable final cash receipt of the retained working capital from the Company’s divested PSS business of about $4 to $6M.  Capital expenditures are predictable to continue to be elevated in 2k19, reflecting predictable outlays associated with manufacturing equipment for the Company’s new drone facility in Oklahoma and equipment for a new secured facility of about $6 to $8M and about $4 to $6M related to the planned manufacture of Company owned aerial target drones in preparation of fulfilling predictable consumer requirements.

KTOS has -23.64% behind from its 52-week high while it has 60.79% up from its 52-week low price. Analyst notified mean rating at 2.20 after consensus analysis. (Rating Scale: 1.0 Strong Buy, 2.0 Buy, 3.0 Hold, 4.0 Sell, 5.0 Strong Sell). Keep in mind that Investors should not rely only on an analyst’s recommendation when taking a decision whether to buy, hold, or sell a stock. Return on assets ratio of the Company was 1.20% and return on equity ratio was 2.50% while its return on investment ratio was 3.20%.

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