Kratos Defense & Security Solutions, Inc. KTOS and L3Harris Technologies LHX operate in the U.S. aerospace and defense industry and are expected to benefit from the long-term increase in global defense spending. Governments around the world, particularly the United States and its allies, are increasing military budgets in response to rising geopolitical tensions and the need to modernize their armed forces. This favorable environment is creating strong demand for advanced defense technologies, including autonomous systems, missile defense, electronic warfare, communications and space-based capabilities. As a result, both companies are well-positioned to capitalize on these long-term defense spending trends, although they pursue different strategies within the sector.
Kratos Defense represents a higher-growth centered on next-generation defense technologies that could experience significant expansion over the coming decade. L3Harris represents a more diversified investment with established businesses, strong recurring cash flows and broad exposure across numerous defense programs.
Let's compare the stocks' fundamentals to determine which one is a better investment option at present.
Factors Acting in Favor of KTOS Stock
Kratos Defense is the primary unmanned aerial target drone system provider for the U.S. Air Force, Navy, Army and several allied defense agencies. This position has led to multiple recent contracts and partnerships that are expanding its presence in the global UAS market, including a Counter-UAS award in March 2026 and teaming activity tied to the XQ-58A Valkyrie. In first-quarter 2026, Unmanned Systems revenues increased to $82.6 million from $63.1 million a year earlier, driven primarily by Valkyrie-related activity.
Kratos Defense is also investing in facilities and programs intended to support future production and test needs, including its hypersonic payload integration facility in Crane, IN, and additional initiatives cited in 2026 planning such as Helios and other engine and radar efforts. The recent Orbit and Nomad acquisitions add capabilities in satellite communications systems and connected mobile operations centers, extending the company’s addressable customer set within national security. Taken together, this mix reduces reliance on any single platform and supports a more durable order flow across cycles.
Factors Acting in Favor of LHX Stock
L3Harris’ space sensing and missile franchises remain aligned with priorities such as Golden Dome, missile defense and hypersonic tracking. In first-quarter 2026, the company delivered 1.4x book-to-bill on $7.8 billion of orders and grew backlog to a record $40.7 billion, which can support program ramps across the portfolio.
Beyond the U.S. market, L3Harris continues to see demand from allies as security priorities broaden across Europe, the Middle East and the Asia-Pacific region. In first-quarter 2026, international revenues totaled $1.29 billion across the portfolio, led by $761 million in Communications & Spectrum Dominance and $427 million in Space & Mission Systems. The quarter reflected increased international deliveries, including growth in international software-defined resilient communications and higher maritime program volume driven by program timing.
How Does the Zacks Consensus Estimate Compare for KTOS & LHX?
The Zacks Consensus Estimate for Kratos Defense’s 2026 earnings per share (EPS) indicates an increase of 30.91% year over year.
Image Source: Zacks Investment Research
The consensus estimate for L3Harris’ 2026 EPS indicates an increase of 7.55% year over year.
Image Source: Zacks Investment Research
Valuation for KTOS & LHX
Kratos Defense shares trade at a forward 12-month Price/Sales (P/S F12M) of 4.6X compared with L3Harris’ 2.11X.
Image Source: Zacks Investment Research
KTOS & LHX’ Return on Equity (ROE)
ROE measures how efficiently a company is utilizing its shareholders’ funds to generate profits. Kratos Defense’s current ROE is 4.3% compared with L3Harris’ 10.65%.
KTOS & LHX’ Price Performance
In the past year, shares of L3Harris have risen 4.9%, while those of Kratos Defense have declined 12.6%.
Image Source: Zacks Investment Research
KTOS or LHX: Which is a Better Choice Now?
Kratos Defense is strengthening its position in unmanned systems through expanding defense contracts, strategic partnerships and growing demand for its advanced drone programs. Investments in new capabilities and recent acquisitions are broadening its exposure across defense and national security markets while supporting more diversified long-term growth. L3Harris is well-positioned to benefit from growing demand for missile defense, space sensing and other advanced defense technologies, supported by a strong backlog and steady contract wins. LHX is also expanding its international presence as allied nations increase defense spending, providing an additional avenue for long-term growth.
Our current preference is L3Harris, given its current price performance, strong ROE and more attractive valuation than Kratos Defense. LHX carries a Zacks Rank #3 (Hold) and KTOS has a Zacks Rank #4 (Sell) at present.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Kratos Defense & Security Solutions, Inc. (KTOS): Free Stock Analysis Report
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This article originally published on Zacks Investment Research (zacks.com).