KTOS - Kratos Defense Security (KTOS) - 2022 NDAA Plays to Kratos Strengths

SASC 2022 NDAA. The Senate Armed Services Committee's (SASC) 2022 National Defense Authorization Act (NDAA) mirrors to a great extent the same proposed legislation passed by the House. Delving deeper into the proposed legislation, we believe numerous proposals play to Kratos' strengths.Details. The SASC proposal allocates $740 billion to the DoD, in-line with the House's $739.5 billion. Both are up significantly from both the Biden Administration's $715 billion proposal, and fiscal 2021's $704.5 billion enacted amount. We expect the Senate Defense bill to be released in the near future and then the two bills will need to be reconciled, but given the similarities, we would anticipate a relatively seamless process.Kratos Wheelhouse. Some of the specific's include an additional $75 million for Valkyrie, an additional $88 million for advanced engine development, another $125 million for unmanned adversary air-platforms, all under the U.S. Air Force; an additional $45 million for unmanned aerial system for the Navy; and authorization of procurement of Iron Dome, David's Sling, and Arrow 3, all of which contain Kratos products.Data Dump. Kratos recently won a $3.2 million award for next generation small engine development; various C5ISR awards totaling $13.2 million; is anticipating another Gremlins test flight this fall; and has demonstrated the ability of its Airwolf aircraft to air-launch loitering munition, among recent Company news.Maintaining Outperform. We continue to believe it is a question of when, not if. We are maintaining our Outperform rating and $30.00 12-month price target. Given the ongoing momentum across most of it business lines, we believe KTOS shares present a favorable risk/reward opportunity. We continue to believe in the long-term prospects of Kratos and believe the Company to be well positioned to capitalize on new and emerging trends in defense. Read More >>