What Happened?
Shares of aerospace and defense company Kratos (NASDAQ: KTOS) fell 15.7% in the morning session after the company reported strong third-quarter results but provided a disappointing financial forecast. While Kratos surpassed Wall Street's expectations for its third quarter, with revenue growing 26% year-over-year to $347.6 million and adjusted earnings per share of $0.14 beating estimates, investors focused on the weaker outlook. The company's fourth-quarter revenue guidance of $325 million at the midpoint fell short of analysts' projections. Moreover, the full-year EBITDA guidance was significantly below expectations, and free cash flow worsened to negative $41.3 million from negative $9.2 million in the same quarter last year. This suggested a potential slowdown and increased cash burn, overshadowing the otherwise positive quarterly results and leading to the sharp sell-off.
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What Is The Market Telling Us
Kratos’s shares are extremely volatile and have had 36 moves greater than 5% over the last year. But moves this big are rare even for Kratos and indicate this news significantly impacted the market’s perception of the business.
The previous big move we wrote about was 13 days ago when the stock gained 5.9% on the news that the company announced it was awarded a $68.3 million contract to build a next-generation hypersonic materials testing center. The contract was awarded through the Department of War's Industrial Base Analysis and Sustainment Program. The new facility, known internally as Project Helios, was designed for hypersonic materials evaluation, specifically to test thermal protection systems used in vehicles that travel at extreme speeds. This project aimed to address critical gaps in U.S. defense industrial capabilities. The award underscored Kratos' focus on developing affordable, high-performance unmanned aerial systems and other advanced solutions to meet evolving defense needs.
Kratos is up 192% since the beginning of the year, but at $76.92 per share, it is still trading 27.2% below its 52-week high of $105.67 from October 2025. Investors who bought $1,000 worth of Kratos’s shares 5 years ago would now be looking at an investment worth $3,838.
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