Kratos Defense & Security (KTOS) PT Raised to $23 at Jefferies on 2H Growth Acceleration

Jefferies analyst Sheila Kahyaoglu raised the price target on Kratos Defense & Security (NASDAQ: KTOS) to $23.00 (from $20.00) with the recent Skyborg downselect and $8BB bid and opportunity pipeline pointing to the upside potential. 2H20 organic growth of 13% is expected to be up substantially from 3% in H1, and is supported by backlog conversion for target drones, C5ISR, and microwave electronics. Looking out into 2021, the analyst expects 14% organic growth.

The analyst maintained a Buy rating, stating "If we take a blue sky scenario of the 15 named unmanned programs for Kratos, we see potential for the UAS division to reach nearly $600MM in 2023, implying a 38% organic CAGR. The segment reported a backlog of $176MM at the end of Q2:20. If we assume KGS grows at a more modest 5% organic rate over the next few years, including the $40MM step down in 2020 Training Solutions revenue tied to an unsuccessful Saudi Training recompete, there may be opportunity for $1.3BB in 2023 total company sales".

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