Image source: Kratos Defense & Security Solutions.

What: Shares of Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS) jumped as much as 21.8% on Friday after reporting second-quarter earnings. At 1:40 p.m. EDT, shares had pulled back slightly to an 18.4% gain for the day.

So what: Total revenue rose 5% to $168.2 million and net loss declined 31% to $10.4 million, or $0.17 per share. Adjusted for one-time items and non-cash amortization expenses, the company earned $0.01 per share compared to the $0.07 loss analysts were expecting.  

Satellite, technology, and training improved the most, increasing revenue 21.2% from a year ago to $70.3 million. Unmanned systems also showed improvement, with revenue up 25.3% sequentially to $17.8 million.

Now what: Along with the improving results, management thinks the U.S. defense budget has hit bottom and will be a macro driver of growth in the future. And the company is well positioned in satellite and unmanned systems, two long-term growth opportunities.

While the business may be improving, it's still experiencing heavy losses on a GAAP (generally accepted accounting principles) basis. And until that stops, I'll sit on the sidelines of this defense stock.