S&P: Kratos Defense view to negative

Standard & Poor's said it revised the outlook on Kratos Defense & Security Solutions Inc. to negative from stable.

The agency also said it affirmed its B corporate credit rating.

The outlook revision reflects weaker-than-expected earnings and cash flow, combined with continued uncertainty surrounding the defense budget, S&P said.

The company's debt-to-EBITDA ratio is expected to remain about 6.5x through 2014 compared with prior expectations of 5x to 5.5x in 2014, the agency said.

While Kratos already experienced order delays stemming from sequestration, the agency said it believes significant uncertainty surrounding the U.S. defense budget could further disrupt demand and volatility around the base-case forecast.

In January 2014, sequestration cuts will increase $20 billion from the level in fiscal 2013 unless Congress acts to change current legislation, S&P said.

The company's exposure to declining defense budgets is partially offset by good program and customer diversity for its size, the agency said.

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