Why Kratos Defense Stock Just Popped
Key Points
Kratos won a satellite control contract from Airbus Defence and Space today.
Kratos will also perform hypersonics work for the U.S. Department of Defense.
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Kratos Defense & Security (NASDAQ: KTOS) stock jumped 6.5% through 10 a.m. ET Wednesday after announcing a pair of contract wins this morning.
The first contract, worth "multi-million" dollars, hires Kratos to supply Airbus Defence & Space (OTC: EADSY) with a ground system for controlling its OmanSat-1 software-defined satellite.
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The second will see Kratos support testing and evaluation of thermal protection systems for hypersonic vehicles for the U.S. Department of Defense.
Image source: Getty Images.
The Airbus contract
Kratos has already partnered with Airbus on "multiple OneSat programs." It was the logical company to supply the instant system. Kratos did not specify how many "multi-million" dollars it will be paid for its work; however, it left investors in the dark on precisely how big the contract is and how much it should move the needle on Kratos stock.
The Department of Defense contract
For the Pentagon, Kratos "will establish standard test conditions and techniques to accelerate materials development" for hypersonic vehicles and weapons. The defense contractor will also "execute a series of material test campaigns leveraging these procedures." It's unknown whether Kratos will test actual vehicles or weapons itself, or if others will perform this work.
Kratos also didn't say anything about the value of this contract.
Is Kratos stock a buy?
While winning contracts is good, and winning two contracts in a single day is even better, without knowing the size of the contracts, it's hard to say for sure that the resulting spike in Kratos's stock price is justified.
What I can tell you is that Kratos's market capitalization jumped by $1.5 billion on the news. That seems like a lot if these contracts are valued only in the millions.
Today's reaction smacks more of momentum trading than of precise valuation by investors.
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Kratos Defense & Security Solutions. The Motley Fool has a disclosure policy.
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