Kratos Defense vs. Elbit Systems: Which One Is the Better Defense Bet?

Kratos Defense & Security Solutions, Inc. KTOS and Elbit Systems ESLT share a strong strategic commonality as technology-focused defense companies positioned around the modernization of military capabilities. Unlike traditional defense contractors that primarily build large, complex platforms such as fighter aircraft, tanks and naval vessels, KTOS and ESLT have a significant presence in high-technology, mission-critical systems. Their expertise extends across unmanned systems, electronic warfare, intelligence and surveillance, communications, precision strike and advanced defense electronics.

This positioning is increasingly relevant as militaries shift toward more distributed, autonomous and software-enabled warfare. Governments are looking for systems that can improve situational awareness, accelerate decision-making, enhance targeting precision and operate effectively in increasingly contested environments. At the same time, defense budgets are facing pressure to deliver greater capability at lower cost, creating demand for systems that are scalable, rapidly deployable and easier to upgrade than traditional large platforms.

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 activity tied to the XQ-58A Valkyrie. In second-quarter 2026, Unmanned Systems revenues increased to $79.1 million from $73.2 million a year earlier, driven primarily by Valkyrie-related activity. Bookings in the segment were worth $78.4 million in the quarter, implying a 1.0 book-to-bill. Backlog totaled $374.6 million as of June 28, 2026. 

Beyond unmanned systems, KTOS is expanding in hypersonics, rocket systems, propulsion and microwave electronics. The company continues to highlight orders for hypersonic vehicles and ongoing development efforts within its Ghost Works organization. KTOS witnessed strong organic growth across several Kratos Government Solutions businesses in second-quarter 2026, with Defense Rocket Systems, Turbine Technologies and Microwave Products growing 50.2%, 43.3% and 29.5%, respectively.

Factors Acting in Favor of ESLT Stock

Elbit Systems has a broader portfolio spanning unmanned systems, electronic warfare, electro-optics, command-and-control, communications and precision-guided systems. In the second quarter of 2026, revenues from C4I & Cyber, ISTAR & Electronic Warfare, Land Systems and Elbit Systems of America grew 11%, 22%, 32% and 17%, respectively. Aerospace was the only major area to decline, falling 8% mainly due to an unfavorable project mix. A key positive is the company’s record $32 billion backlog, which provides strong long-term revenue visibility. International customers account for about 73% of the backlog, while 42% is expected to be executed through the remainder of 2026 and 2027.

The quarter underscores ESLT’s continued benefits from rising global defense spending and growing demand for advanced defense technologies. The combination of double-digit sales growth, expanding margins, record backlog, stronger cash flow and growing international demand provides a strong foundation for continued growth.

How Do Zacks Estimates Compare for KTOS & ESLT?

The Zacks Consensus Estimate for Kratos Defense’s 2026 and 2027 earnings per share (EPS) indicates an increase of 50.91% and 37.06%, respectively, year over year.
 

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The Zacks Consensus Estimate for Elbit Systems’ 2026 and 2027 EPS implies an improvement of 26.51% and 17.05%, respectively, year over year.

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ESLT’s Valuation More Attractive Than KTOS

KTOS’ shares trade at a forward 12-month Price/Sales (P/S F12M) of 4.84X compared with ESLT’s 3.24X, making ESLT relatively more attractive from a valuation standpoint.

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Debt Position of KTOS & ESLT

Currently, KTOS’s total debt-to-capital ratio is zero, whereas ESLT’s is 5.72%.

The time-to-interest earned ratio for Kratos Defense at the end of second quarter of 2026 was negative, while that for Elbit Systems was 6.7. The ratio, being greater than one, reflects the company’s ability to meet future interest obligations without difficulties.

KTOS & ESLT’s Price Performance

In the past year, shares of Elbit Systems have risen 48.9%, while those of Kratos Defense have lost 22.7%.

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KTOS or ESLT: Which Is a Better Choice Now?

Kratos Defense is strengthening its position in next-generation defense through leadership in unmanned aerial systems while expanding across hypersonics, rocket systems, propulsion, and advanced microwave technologies. Elbit Systems benefits from broad exposure to advanced defense technologies, with strong demand across electronic warfare, unmanned systems, land systems, communications, and precision-guided solutions, supported by a large international backlog and rising global defense spending.

Our choice at the moment is Elbit Systems, given its better price performance and more attractive valuation than Kratos Defense. ESLT carries a Zacks Rank #2 (Buy), while KTOS holds a Zacks Rank #3 (Hold) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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

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