Why Kratos Stock Just Dropped

Kratos Defense & Security (NASDAQ: KTOS) banal fell 5.3% done 10:20 a.m. Thursday contempt beating connected Q1 net study past night.

Analysts expected the drones shaper to gain $0.13 per share, pro forma, connected $344.6 cardinal successful sales. In fact, Kratos earned $0.16 per stock and reported income of $371 million.

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Kratos Q1 net

The quality wasn't rather arsenic bully arsenic that sounds, however.

Sales surged 23% twelvemonth implicit twelvemonth successful Q1, led by the company's unmanned systems (i.e., drones) unit, which grew 31%. Government solutions accounted for the bulk of Kratos's revenue, but grew lone 12%.

GAAP net (earnings calculated nether mostly accepted accounting principles) much than doubled twelvemonth implicit year, but inactive amounted to lone $0.07 per stock -- not $0.16.

And Kratos's escaped currency travel ran negative, with the institution reporting $47.3 cardinal successful currency pain for the 4th ($43.1 cardinal if you number proceeds from plus sales). On the positive side, this was a spot little currency than Kratos burned successful Q1 2025.

What's adjacent for Kratos stock?

Kratos has reported affirmative GAAP profits implicit the past 2 years but has burned currency successful astir years. The bully quality is that the institution continues to turn rapidly -- and whitethorn yet turn itself retired of this trend. Book-to-bill looked bully successful Q1, with a 1.6x ratio of caller orders coming successful versus aged orders being fulfilled and transformed into revenue.

Accordingly, Kratos is raising its guidance done the extremity of 2026, and present anticipates income of $1.7 cardinal oregon better. Still, escaped currency travel volition tally antagonistic by $85 cardinal to $105 million.

At a valuation northbound of 360 times earnings, and with currency inactive connected fire, I spot nary compelling crushed to ain Kratos banal today.

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