Why Kratos Defense and Security Stock Topped the Market Today

Key Points

• It had an analyst's price target raise to thank for that.

• The optimistic pundit lifted his fair value assessment by a robust 38%.

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A generous price target increase by an analyst was the development driving up the value of Kratos Defense & Security Solutions' (NASDAQ: KTOS) equity as the trading week neared its end on Thursday. The company's share price enjoyed a healthy lift of nearly 4% that day as a result, comparing favorably to the 0.5% decline of the benchmark S&P 500 index.

A nearly 40% increase brought bulls into the stock

The raiser was RBC Capital's Ken Herbert, who decided to enhance his fair value assessment on Kratos by 38%. His new level for the drone maker is $90 per share, well up from his preceding price tag of $65. With the change, he understandably maintained his outperform (read: buy) recommendation on the stock.

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The reasoning behind Herbert's move wasn't immediately clear. However, it doesn't seem coincidental that it came just after the defense company delivered several pieces of good news about its business.

Most notably, on Tuesday, Kratos announced that it had entered into a five-year strategic manufacturing arrangement with a privately held, next-generation aircraft maker called Elroy Air. That company develops self-piloting aircraft specializing in military logistics. Under the terms of the deal, Kratos will be the exclusive manufacturing partner of Elroy's Chaparral cargo drone.

Up, up, and away

The same day, busy Kratos also announced that it and large peer GE Aerospace have launched altitude testing on a state-of-the-art drone engine they've been developing. That engine, the GEK800, is, in Kratos's words, "designed to power the next generation of affordable unmanned aerial systems and CCA-type aircraft."

"CCA" stands for collaborative combat aircraft, a class of "wingman" uncrewed craft being developed by the U.S. military to accompany fighter jets on combat missions.

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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool recommends GE Aerospace. The Motley Fool has a disclosure policy.