Stifel has maintained a Buy recommendation and kept a $134.00 price objective on Kratos Defense & Security Solutions (NASDAQ:KTOS) after the defense contractor reported stronger-than-expected fourth-quarter results.
The company delivered fourth-quarter revenue that rose 20% on an organic basis and topped consensus by roughly 5%. Management recorded a book-to-bill ratio of 1.3x in the quarter, a figure Stifel and the company said was impacted by a government shutdown.
Kratos also signaled continued commercial activity that underpins its growth trajectory. The firm announced a slate of new contract pursuits and said it is making capacity investments aimed at supporting defense industrial base recapitalization. Management reaffirmed multi-year revenue targets, projecting a high-teens compound annual growth rate for 2026 and 2027.
On margins, Kratos expects improvement of about 100 basis points each year through 2027. Stifel highlighted that these results and the outlook were achieved despite the quarter being affected by the government shutdown.
Market performance has been notable. The stock has climbed 287% over the past year, a sharp appreciation that InvestingPro data cautions may indicate the shares are overvalued at current levels.
Earnings details and peer responses
In its fourth-quarter 2025 report, Kratos beat both earnings-per-share and revenue forecasts. The company posted EPS of $0.18 versus consensus of $0.17, and revenue of $345.1 million compared with an expected $327.63 million.
Brokerage reactions were broadly supportive. Canaccord Genuity raised its price target on Kratos to $125 while maintaining a Buy rating. Truist Securities reiterated a Buy stance, calling out Kratos’ momentum in the hypersonics business and a 2025 revenue performance that beat expectations. Cantor Fitzgerald kept an Overweight rating but flagged higher-than-expected free cash flow burn in the fourth quarter and in its 2026 forecast, while noting that growth in orders and tactical drone production could offset that cash flow pressure. Citizens restated a Market Outperform rating and emphasized the company’s sizable total addressable market across multiple areas as a driver of long-term capital appreciation.
Stifel’s recommendation cited the company’s active contract pursuits and the prospect of increased defense budgets as supporting factors for continued upside.
Context for investors
The company’s confirmed guidance for 2026 and 2027 foresees revenue growth ranges management quantified as 15-20% for 2026 and 18-23% for 2027, which align with the previously stated high-teens compound annual growth rate trend. Margin expansion targets and capacity investments were reiterated as components of the multi-year plan.
While analysts and brokers responded with mostly positive notes and adjusted price targets, some firms continue to highlight cash flow and execution risks even as order growth and product lines such as tactical drones and hypersonics receive attention.
Takeaway
Kratos’ fourth-quarter results and management’s reaffirmed multi-year outlook prompted Stifel and several other brokerages to maintain or lift positive ratings. The company’s revenue beat, EPS outperformance, book-to-bill above 1.0, and ongoing contract pursuits underpin the bullish analyst commentary, though valuation and cash-flow dynamics are cited as potential offsets by some market participants.