Why Kratos Defense Stock Is Falling Today

Defense tech company Kratos Defense & Security Solutions (NASDAQ: KTOS) reported a better-than-expected quarter, but it appears that at least some of that outperformance came at the expense of the months to come.

Shares of Kratos fell 11% at the open Thursday before recovering slightly, trading down 5% as of 10:30 Eastern.

Choppy quarter-to-quarter sales

Kratos is a defense contractor focused on unmanned aerial vehicles and defense electronics. The company earned $0.14 per share in the quarter on revenue of $300.1 million, easily topping Wall Street's forecast for $0.08 per share in earnings on sales of $276 million.

Revenue was up 16.7% year over year, and EBITDA grew by 38.4%. But investors were more focused on third-quarter guidance. Kratos expects to report between $265 million and $280 million in sales in the current quarter, below the $292 million consensus estimate.

Is Kratos stock a buy?

Defense businesses, particularly those like Kratos with international contracts, tend to be choppy. Kratos said that some of the revenue it had expected to record in the third quarter came in during the second quarter, which skewed the numbers for both periods.

Looking at the big picture, the company reaffirmed its previous guidance for $1.13 billion to $1.15 billion in revenue, which at the top end is in line with expectations. And Kratos' Valkyrie tactical jet drone, an important platform for the company, appears on track for a production contract late in 2024 or early in 2025.

Kratos has long been one of the more volatile investments in the defense sector, with more risks but higher potential reward than the larger prime contractors. The journey has taken longer than some investors had hoped, but Kratos still appears to be headed in the right direction.

For investors willing to be patient, Thursday's declines could be a buying opportunity.

Lou Whiteman has positions in Kratos Defense & Security Solutions. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy .