Kratos Defense Jumps to New High on Strong Growth Outlook and Upbeat Price Targets

Kratos Defense & Security Solutions (NASDAQ:KTOS) reached a new all-time high on Friday after raising its full-year 2025 revenue growth forecast to $1.29-$1.31 billion. The company expects to benefit from US government defense and security programs. Raymond James raised its price target to $80 from $40, while Royal Bank of Canada upgraded its target to $65 from $50.

Kratos Defense & Security Solutions, Inc. (NASDAQ: KTOS) reported its second quarter 2025 financial results, showcasing a robust performance driven by significant organic growth and increased bookings. The company's revenues for the quarter reached $351.5 million, reflecting a 17.1% growth over the same period in 2024. This growth was primarily driven by the KGS segment, which grew by 27.1% year-over-year, with notable contributions from the Defense Rocket Systems and C5ISR businesses.

The company's book-to-bill ratio stood at 0.7 to 1.0 for the second quarter, indicating a healthy balance between bookings and billings. Kratos' total backlog at the end of the second quarter 2025 was $1.414 billion, compared to $1.508 billion at the end of the first quarter 2025. This robust backlog is a testament to the company's strong position in the market and its ability to secure new contracts.

Kratos' President and CEO, Eric DeMarco, highlighted the significant global funding committed to defense and national security, noting that the market is expected to grow for the foreseeable future. He also mentioned the company's success in securing new contracts and its strong pipeline, which is expected to drive future growth. The company expects to see increased EBITDA margins beginning in 2026, as new higher margin programs begin and certain lower margin contracts are renegotiated.

Raymond James and Royal Bank of Canada have recently upgraded their price targets for Kratos, reflecting the market's optimism about the company's prospects. Raymond James raised its price target to $80 from $40, while Royal Bank of Canada upgraded its target to $65 from $50.

Despite the strong performance, Kratos' Unmanned Systems (KUS) segment reported an operating loss of $0.3 million, compared to operating income of $3.6 million in the second quarter of 2024. This loss was primarily due to the impact of increased material and subcontractor costs on multi-year fixed price production contracts.

Overall, Kratos' second quarter 2025 financial results demonstrate the company's strong position in the defense and security market, driven by significant organic growth and increased bookings. The company's robust pipeline and strong backlog position it well for future growth.

References:
[1] https://finance.yahoo.com/news/kratos-reports-second-quarter-2025-200000116.html