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Why Kratos Defense & Security Solutions, Inc Stock Surged 58% Higher in August

Drones are starting to be a big business for Kratos Defense & Security Solutions, Inc. Image source: Getty Images.

What happened

Shares of defense contractor Kratos Defense & Security Solutions, Inc (NASDAQ: KTOS) jumped a whopping 58.3% in August, according to data provided by S&P Global Market Intelligence, after reporting earnings and some key contract wins.

So what

Second-quarter revenue grew 4.8% to $168.2 million and net loss improved from $15.0 million a year ago to $10.4 million, or $0.17 per share. Within that, the unmanned systems division showed a 25.3% increase in revenue to $17.8 million, showing strong performance in drones.  

Kratos also won a $20 million contract to provide a tanker training system to Boeing and got a $14 million drone order during the month. New contracts are key because the company has been keeping engineering staff in high anticipation of winning drone contracts in the future. Some of those orders are now coming to fruition, which should lead to better financials over the next year.

Now what

It's important to keep in mind that Kratos is still losing money, so there's still a lot of financial risk for investors. But shares had fallen so far -- as low as $2.80 per share in the last 52 weeks -- that good news could result in huge gains for investors. As losses shrunk and new contracts poured in during August, the stock started to see that leverage in action. Just keep an eye out for more momentum in sales, because Kratos needs to show continued growth or the losses will persist.

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Travis Hoium has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.