Why Kratos (KTOS) Is Spiking Today

NEW YORK (TheStreet) -- Kratos Defense & Security Solutions (KTOS) was spiking 13.6% to $8.21 Monday after the company announced a its Defense & Rocket Support Services division won a five-year SeaPort-e IndefiniteDelivery, Indefinite Quantity Multiple Award Contract.

The contract comes from the Naval Surface Warfare Center, Dahlgren, and covers seven zones with a maximum value of $7.92 billion. The contract means the company can "continue providing support to the U.S. Navy and Marine Corps with our full range of engineering and technical capabilities as a prime contractor," Dave Carter, president of Kratos' DRSS division said in a press release.

Under the contract, Task Order can be issued by the Naval Sea Systems Command, Naval Air Systems Command, Space and Naval Warfare Systems Command, Naval Supply Systems Command, Military Sealift Command, Naval Facilities Command, Strategic Systems Programs, Office of Naval Research, and the United States Marine Corps.

TheStreet Ratings team rates KRATOS DEFENSE & SECURITY as a Hold with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:

"We rate KRATOS DEFENSE & SECURITY (KTOS) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. Among the primary strengths of the company is its solid stock price performance. At the same time, however, we also find weaknesses including deteriorating net income, disappointing return on equity and poor profit margins."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Compared to its closing price of one year ago, KTOS's share price has jumped by 58.69%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
  • KTOS, with its decline in revenue, underperformed when compared the industry average of 8.3%. Since the same quarter one year prior, revenues fell by 18.1%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • KRATOS DEFENSE & SECURITY has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, KRATOS DEFENSE & SECURITY reported poor results of -$2.13 versus -$0.84 in the prior year. This year, the market expects an improvement in earnings ($0.16 versus -$2.13).
  • Net operating cash flow has significantly decreased to $2.30 million or 91.18% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Aerospace & Defense industry. The net income has significantly decreased by 135.7% when compared to the same quarter one year ago, falling from -$4.20 million to -$9.90 million.