Shareholders of Kratos Defense & Security Solutions, Inc (NASDAQ:KTOS) are having a rough day as the company’s stock is down by 15% in late Thursday trading. The fall in Kratos Defense’s share price is attributed to weaker-than-expected first-quarter results, with revenue down 2.6% to $153 million and net loss grew 37% to $22.2 million, or $0.37 per share.
However, Jefferies analyst Sheila Kahyaoglu raised the price target for the stock from $4.15 to $5.00, while reiterating a Hold rating. The new price target represents a potential upside of 9% from where the stock is currently trading.
Kahyaoglu explained, “Kratos reported Q1:16 GAAP EPS from cont. ops was a loss of ($0.37), which compares to our forecast for a loss of ($0.12). Adj. EPS was a loss of ($0.13) which excluded $7.2MM in restructuring charges and other items. Revenues contracted 3% YoY, but were 2% above our forecast. An operating loss of $10.2MM was below our estimate of a loss of $0.4MM due to one-time expenses and mix. We expect profitability to improve throughout the year.”
Furthermore, “During the quarter, Kratos executed a cost reduction plan and reorganized PS&S, which should help improve the operational performance. Aggregate headcount was reduced by over 120 personnel. Finally, KGS revenue increased 1% YoY due to Microwave Electronics ($12.8MM, up 23.4%) and Satellite, Technology & Training ($59MM, up 11.3%). Microwave Electronics is experiencing solid growth due to demand for missile systems. The satellite business is seeing a pick-up due to international threats.”
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Sheila Kahyaoglu has a yearly average return of -4.1% and a 52.9% success rate. Kahyaoglu has a average return when recommending KTOS, and is ranked #2943 out of 3901 analysts.