Kratos Defense & Security Solutions, Inc. KTOS recently secured a $59.3 million contract for the production of an additional 70 BQM-177A Subsonic Aerial Target (SSAT) aircraft. The award has been provided by the Naval Air Systems Command, Patuxent River, MD.

This contract is part of a bigger contract valued at $227.6 million.  The majority of the work related to the latest contract will be conducted in Kratos Defense’s facilities in Sacramento, CA, and Fort Walton Beach, FL.

What’s Favoring KTOS Stock?

With rapidly growing investments in military weapons and warfare technology in recent times, funding for autonomous systems like unmanned aerial vehicles (UAVs) is also increasing. This is likely to have prompted the Mordor Intelligence firm to forecast a compound annual growth rate of 10.8% for the global UAV market during the 2025-2030 period.

This benefits Kratos Defense, as it offers a diverse range of tactical UAVs, including the XQ-58A Valkyrie, UTAP-22 Mako and X-61A Gremlin, along with aerial target drones like the BQM-167A, BQM-177A and MQM-178 Firejet.

In particular, the BQM-177A is the U.S. Navy’s next-generation SSAT, designed to simulate advanced missile threats. With speeds exceeding 0.95 Mach and a sea-skimming altitude as low as 6.6 feet, it provides a highly realistic anti-ship missile threat simulation. Its advanced aerodynamic design and high maneuverability make it an ideal choice for air-to-air and naval defense training.

Kratos Defense’s UAVs stand out due to their affordability, durability, long-range capabilities and flexible mission configurations. With such features, KTOS enjoys a solid flow of contracts like the latest one and should also continue to lock in such orders in the days ahead involving its UAVs. Such orders should boost the company’s revenue generation prospects.

Opportunities for Other Defense Stocks

Other defense companies that are likely to benefit from the expanding UAV market are discussed below:

Lockheed Martin Corporation LMT: The company has a vast portfolio of autonomous aerial systems, including the Indago 4, MORFIUS, Stalker Unmanned Aircraft System (UAS) and a few more. On Feb. 26, 2025, LMT unveiled a scalable counter-unmanned aerial system solution that has been designed to detect, track, identify and defeat small UAS.

Lockheed has a long-term (three to five years) earnings growth rate of 7.8%. The Zacks Consensus Estimate for LMT’s 2025 sales indicates year-over-year growth of 4.6%.

Northrop Grumman Corporation NOC: It is a prominent forerunner in autonomous systems and offers an impressive portfolio of UAVs, which include Global Hawk, MQ-4C Triton, Fire Scout, Bat unmanned aircraft system, X-47B UCAS and NATO Alliance Ground Surveillance.

Northrop has a long-term earnings growth rate of 4.2%. The Zacks Consensus Estimate for NOC’s 2025 sales indicates year-over-year growth of 3%.

BAE Systems BAESY: Its PHASA-35 is an ultra-lightweight, solar-electric High Altitude Pseudo Satellite UAS. It offers an alternative and flexible approach to conventional systems, such as satellites or conventionally powered aircraft, for the provision of persistent and cost-effective imagery and communications. Taranis and DEMON are also UAVs produced by BAESY.

BAE Systems has a long-term earnings growth rate of 11.9%. The Zacks Consensus Estimate for BAESY’s 2025 sales indicates year-over-year growth of 55.7%.

KTOS Stock Price Movement

Shares of Kratos Defense have gained 26.8% in the past six months compared with the industry’s 9.5% growth.

Image Source: Zacks Investment Research

KTOS’ Zacks Rank

Kratos Defense currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Lockheed Martin Corporation (LMT) : Free Stock Analysis Report

Northrop Grumman Corporation (NOC) : Free Stock Analysis Report

Bae Systems PLC (BAESY) : Free Stock Analysis Report

Kratos Defense & Security Solutions, Inc. (KTOS) : Free Stock Analysis Report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research