What happened
Defense services contractor Kratos Defense & Security Solutions (KTOS 8.79%) outpaced the market last month by gaining 11% compared to a 0.4% increase in the S&P 500, according to data provided by S&P Global Market Intelligence.
The rally pushed shares deeper into positive territory, with the stock up about 30% so far in 2018.
So what
Kratos' latest earnings report, issued in early August, contained evidence of modest operating improvements. Sales inched higher by 2% and adjusted profitability improved to 8% of sales from 7% a year earlier.
Image source: Getty Images.
But investors are more excited about future growth, since the company has ramped up its pace of contract awards recently. A new project with the Pentagon, for example, promises to significantly boost revenue in its unmanned aerial systems segment.
Now what
Kratos hasn't yet hit its goal of returning to bottom-line profitability, but these new contracts should help in that regard. As for the immediate future, CEO Eric DeMarco and his team are projecting a roughly 7% sales uptick in fiscal 2018. The company might not generate positive earnings, meanwhile, but executives do believe they'll produce cash flow of as much as $45 million this year.
