Kratos Defense & Security Solutions Earnings: Here’s Why the Stock is Falling Now

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Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS) delivered a profit and beat Wall Street’s expectations, AND beat the revenue expectation. The revenue beat is a positive sign to shareholders seeking high growth out of the company. Shares are down 16.29%.

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Kratos Defense & Security Solutions, Inc. Earnings Cheat Sheet

Results: Adjusted Earnings Per Share increased to $0.15 in the quarter versus EPS of $-0.25 in the year-earlier quarter.

Revenue: Rose 20.81% to $263.6 million from the year-earlier quarter.

Actual vs. Wall St. Expectations: Kratos Defense & Security Solutions, Inc. reported adjusted EPS income of $0.15 per share. By that measure, the company beat the mean analyst estimate of $-0.07. It beat the average revenue estimate of $262.28 million.

Quoting Management: Eric DeMarco, Kratos’ President & CEO said, “We closed out 2012 positioned well for 2013, generating a 1.1 to 1.0 book-to-bill ratio and $41 million of Adjusted Free Cash Flow for the year, giving us confidence in our 2013 Adjusted Free Cash Flow target of $50 million. As we begin 2013, we believe that Kratos is a uniquely differentiated specialty product and solutions business, focused on strategic mission critical National Security programs, platforms and initiatives which we believe will remain funding priorities for our country. We also believe that the current and expected future budgetary environment will provide companies like Kratos the opportunity to demonstrate our ability to offer cost saving innovations and deliver leading edge technology and products that address our customers’ mission and are affordable. Our plan for 2013 is to remain laser focused on operational excellence, cash flow generation and the integration of the businesses we acquired in 2012, including CEI, which has performed outstandingly well as we originally expected. We will continue our ongoing facilities and back office consolidation and cost reduction initiatives, reducing non-critical and duplicative G&A and overhead, and focus our IR&D investments in areas where we see growth opportunities. Also importantly, in 2013 we expect Kratos’ critical infrastructure security and public safety business to recover from the work stoppage and delays we experienced in the fourth quarter of 2012 as a result of Hurricane Sandy, and for this business to continue an organic growth trajectory in the second half of 2013.”

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