Yahoo Finance Kratos (KTOS) Wins Modification Contract for Combat Drones
Kratos Defense & Security Solutions, Inc. KTOS recently clinched a modification contract to procure 65 BQM-177A Sub sonic Aerial Targets (SSAT). Amongst these 65 aerial target drones, 50 drones will be supplied to the U.S. Navy, seven to the government of Japan and eight drones to the government of Saudi Arabia.
Valued at $50.9 million, the latest contract win is Kratos’ third consecutive full-rate production contract serving the U.S. Navy. The deal has been awarded by the Naval Air Systems Command, Patuxent River, MD.
Importance of BQM-177A Sub Sonic Aerial Target
Kratos is one of the leading manufacturers of high-performance aerial target drones for the military. Amongst several drones that the company offers, its BQM-177A is the U.S. Navy’s next-generation SSAT.
The BQM-177A provides formidable threat emulation for air-to-air engagements. Its aerodynamic design and unmatched performance capabilities make it the best choice for highly dynamic, high-subsonic, sea-skimming anti-ship cruise missile threat emulation. Additionally, with the ability of speeds above 0.95 Mach and a sea-skimming altitude as low as 6.6 feet, the BQM-177A has no equal when it comes to delivering realistic anti-ship missile threat emulation.
Such remarkable features that could emulate the existing and emerging threats must have attracted the U.S. Navy and resulted in multiple orders for Kratos. KTOS expects to remain in the growth trajectory for SSAT and anticipates an increase in contract wins. This, in turn, should bolster its revenues from the drone business line.
Growth Prospects of Aerial Target Drone
The growing importance of aerial target drones is the result of their unmanned aerial vehicle feature that can be controlled remotely. Moreover, these offer flexibility to any defense system to reach any hazardous area, with negligible risk and minimal cost.
Consequently, nations across the globe have also increased their defense spending for an effective and efficient aerial drone system to fortify their military arsenals. Per the report from Emergen research, the military drones’ market is anticipated to grow at a CAGR of 10.9% during the 2020-2028 period. In this regard, Kratos, being a prominent aerial target drone manufacturer, embodies significant growth prospects in the aforementioned market.
Defense majors who are likely to benefit from the growth prospects of the military drone market are:
Lockheed Martin’s LMT Indago vertical takeoff and landing is a small unmanned aerial system (UAS) that brings expeditionary intelligence, surveillance and reconnaissance (ISR) applications. Combined with the aircraft’s whisper-quiet acoustic signature, the high-resolution camera systems provide users with incredible zoom capability to accurately identify people, objects, vehicles and weapons.
Lockheed Martin’s long-term earnings growth rate is pegged at 3.6%. LMT’s shares have returned 1.9% in the past three months.
Northrop Grumman’s NOC RQ-4 Global Hawk UAS is the premier provider of persistent ISR information. Able to fly at high altitudes for more than 30 hours, Global Hawk is designed to gather near-real-time, high-resolution imagery of large areas of land in all types of weather – day or night.
Northrop Grumman has a long-term earnings growth rate of 8.9%. NOC’s investors have gained 26.4% in the past year.
Airbus Group’s EADSY UAS is increasingly integrating into the airspace, providing unrivaled ISR data for both military and civil applications. Its European Medium Altitude Long Endurance Remotely Piloted Aircraft System is capable of performing Intelligence, Surveillance, Target Acquisition and Reconnaissance missions.
The Zacks Consensus Estimate for Airbus Group’s 2021 earnings indicates year-over-year growth of 3.9%. Shares of EADSY have returned 16.3% in the past year.
Price Movement
In the past year, shares of Kratos have declined 29.7% against the industry’s growth of 10.7%.
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Zacks Rank
Kratos currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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