Kratos Defense (NASDAQ: KTOS) reported Q4 EPS of $0.09, $0.03 better than the analyst estimate of $0.06. Revenue for the quarter came in at $164.4 million versus the consensus estimate of $188.24 million.

Eric DeMarco, Kratos’ President and CEO, said, “Kratos completed a very successful 2018, with our Unmanned Systems Division generating organic growth of approximately 75% over the past 24 months, and we are now forecasting Kratos target drone business to grow to approximately $250 million in annual revenue over the next few years, or 90% organic growth above 2018 revenues. Additionally, we currently have six customer funded affordable tactical drone development programs, with several additional programs expected to be under contract by the end of this year. Based on recent customer meetings, we are more confident than ever that Kratos Unmanned Systems Division will be a leader in the fast growing and forecast to be multi-billion dollar tactical drone market, and we ultimately expect our tactical drone business to be substantially larger than our target drone business as we achieve production.”

Mr. DeMarco continued, “Kratos’ space, satellite and training business, our Company’s largest division, which is also well aligned with DoD priorities, had a strong 2018, and with a last six month book to bill ratio of 1.5 to 1.0, is positioned for sustained future organic growth. Additionally, Kratos’ ballistic missile targets and hypersonic systems business is currently pursuing a number of large new program opportunities, which if we are successful and schedules hold, could provide upside to our 2019 financial forecast, and position the business for further substantial growth in 2020.”

Mr. DeMarco concluded, “Kratos’ business model of utilizing proven leading edge technology, not unproven bleeding edge technology, which reduces schedule risk, performance risk and cost risk, is a clear competitive differentiator for our Company, with Kratos’ proven ability to rapidly develop, demonstrate and field technology leading systems at an affordable cost being highly valued by our customers. Kratos is a unique strategic technology asset, disrupting the national security market, with the right products at the right price and at the right time.”

GUIDANCE:

Kratos Defense sees Q1 2019 revenue of $147-157 million, versus the consensus of $169.8 million.

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