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Why Is Mercury Systems (MRCY) Up 3.9% Since Last Earnings Report?
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It has been about a month since the last earnings report for Mercury Systems (MRCY - Free Report) . Shares have added about 3.9% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Mercury Systems due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Mercury Systems Beats Q3 Earnings & Revenue Estimates
Mercury Systems reported better-than-expected results in the third quarter of fiscal 2022. The aerospace and defense tech firm reported non-GAAP earnings of 57 cents per share, which surpassed the Zacks Consensus Estimate by a penny.
However, Mercury Systems’ bottom line declined by approximately 11% from the 64 cents per share reported in the year-ago quarter. The year-over-year decline was mainly due to lower revenues, increased costs and higher operating expenses as a percentage of sales.
Mercury Systems’ non-GAAP revenues of $253.1 million beat the consensus mark of $247.2 million. However, it decreased by 1.5% year over year, mainly due to a decline in organic revenues, partially offset by sales contributions from newly acquired businesses.
Quarterly Details
Mercury Systems’ acquired businesses (8% of the total revenues) — Pentek, Avalex Technologies and Atlanta Micro — cumulatively contributed $19.3 million to third-quarter revenues. Additionally, organic revenues (92% of the total revenues) plunged approximately 9% year over year and contributed $233.7 million to third-quarter sales.
The decline was mainly due to supply chain-related contracting delays. However, MRCY noted that the 9% year-over-year decline was slightly better than management’s expectations.
Mercury Systems’ total bookings were $295 million, resulting in a 1.17 book-to-bill ratio. The company’s largest bookings in the reported quarter were LTAMDS, CH53K, F-16, P-1171 and the top five radar program.
The company ended the quarter with a backlog of $996 million, up $102.3 million on a year-over-year basis. Within the next 12 months, products worth $637.6 million from this order backlog are expected to be shipped.
Operating Details
Mercury Systems’ gross profit was $99.8 million, down 5.6% year over year. Moreover, its gross margin contracted by 170 basis points (bps) to 41.1%, mainly due to a negative impact of a higher mix of the new programs.
Adjusted EBITDA declined by 4.2% year over year to $52.5 million, while the margin contracted by 60 bps to 20.7%. The decline was mainly due to a lower gross margin and negative operating leverage as organic revenues declined year over year.
Total operating expenses increased 7% to $89.8 million. SG&A expenses as a percentage of revenues increased 60 bps to 15.5%. Research & development expenses as a percentage of revenues contracted by 180 bps to 10%.
Balance Sheet & Other Details
As of Apr 2, 2022, MRCY’s cash and cash equivalents were $91.7 million compared with $105.2 million as of Dec 31, 2021. The long-term debt was $451.5 million at the end of the third quarter.
The company used $4.3 million of cash for operational activities in the third quarter while generating a positive operating cash flow of $0.6 million in the first three quarters of fiscal 2022. It generated a negative free cash flow of $10.3 million in the third quarter and $18.9 million in the first nine months of fiscal 2022.
Guidance
Mercury Systems lowered its guidance for fiscal 2022. The company now expects fiscal 2022 revenues between $1 billion and 1.02 billion compared with the previous guidance range of $1-$1.03 billion. Adjusted EBITDA is expected in the range of $210-$217 million, down from the earlier projection of $220-$227 million. Expectations for fiscal 2022 adjusted earnings have been lowered to the $2.34-$2.44 per share range from the $2.51-$2.60 per share band.
For the fourth quarter, Mercury Systems projects revenues between $301.5 million and $321.5 million. Adjusted EBITDA is anticipated between $81.1 million and $88.1 million. Adjusted earnings are projected in the range of 96 cents-$1.06 per share.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
The consensus estimate has shifted -7.94% due to these changes.
VGM Scores
At this time, Mercury Systems has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Mercury Systems has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Why Is Mercury Systems (MRCY) Up 3.9% Since Last Earnings Report?
It has been about a month since the last earnings report for Mercury Systems (MRCY - Free Report) . Shares have added about 3.9% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Mercury Systems due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Mercury Systems Beats Q3 Earnings & Revenue Estimates
Mercury Systems reported better-than-expected results in the third quarter of fiscal 2022. The aerospace and defense tech firm reported non-GAAP earnings of 57 cents per share, which surpassed the Zacks Consensus Estimate by a penny.
However, Mercury Systems’ bottom line declined by approximately 11% from the 64 cents per share reported in the year-ago quarter. The year-over-year decline was mainly due to lower revenues, increased costs and higher operating expenses as a percentage of sales.
Mercury Systems’ non-GAAP revenues of $253.1 million beat the consensus mark of $247.2 million. However, it decreased by 1.5% year over year, mainly due to a decline in organic revenues, partially offset by sales contributions from newly acquired businesses.
Quarterly Details
Mercury Systems’ acquired businesses (8% of the total revenues) — Pentek, Avalex Technologies and Atlanta Micro — cumulatively contributed $19.3 million to third-quarter revenues. Additionally, organic revenues (92% of the total revenues) plunged approximately 9% year over year and contributed $233.7 million to third-quarter sales.
The decline was mainly due to supply chain-related contracting delays. However, MRCY noted that the 9% year-over-year decline was slightly better than management’s expectations.
Mercury Systems’ total bookings were $295 million, resulting in a 1.17 book-to-bill ratio. The company’s largest bookings in the reported quarter were LTAMDS, CH53K, F-16, P-1171 and the top five radar program.
The company ended the quarter with a backlog of $996 million, up $102.3 million on a year-over-year basis. Within the next 12 months, products worth $637.6 million from this order backlog are expected to be shipped.
Operating Details
Mercury Systems’ gross profit was $99.8 million, down 5.6% year over year. Moreover, its gross margin contracted by 170 basis points (bps) to 41.1%, mainly due to a negative impact of a higher mix of the new programs.
Adjusted EBITDA declined by 4.2% year over year to $52.5 million, while the margin contracted by 60 bps to 20.7%. The decline was mainly due to a lower gross margin and negative operating leverage as organic revenues declined year over year.
Total operating expenses increased 7% to $89.8 million. SG&A expenses as a percentage of revenues increased 60 bps to 15.5%. Research & development expenses as a percentage of revenues contracted by 180 bps to 10%.
Balance Sheet & Other Details
As of Apr 2, 2022, MRCY’s cash and cash equivalents were $91.7 million compared with $105.2 million as of Dec 31, 2021. The long-term debt was $451.5 million at the end of the third quarter.
The company used $4.3 million of cash for operational activities in the third quarter while generating a positive operating cash flow of $0.6 million in the first three quarters of fiscal 2022. It generated a negative free cash flow of $10.3 million in the third quarter and $18.9 million in the first nine months of fiscal 2022.
Guidance
Mercury Systems lowered its guidance for fiscal 2022. The company now expects fiscal 2022 revenues between $1 billion and 1.02 billion compared with the previous guidance range of $1-$1.03 billion. Adjusted EBITDA is expected in the range of $210-$217 million, down from the earlier projection of $220-$227 million. Expectations for fiscal 2022 adjusted earnings have been lowered to the $2.34-$2.44 per share range from the $2.51-$2.60 per share band.
For the fourth quarter, Mercury Systems projects revenues between $301.5 million and $321.5 million. Adjusted EBITDA is anticipated between $81.1 million and $88.1 million. Adjusted earnings are projected in the range of 96 cents-$1.06 per share.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
The consensus estimate has shifted -7.94% due to these changes.
VGM Scores
At this time, Mercury Systems has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Mercury Systems has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.