Mercury Systems (MRCY - Free Report) shares plunged nearly 9% in Monday’s extended trading session after the aerospace and defense tech firm reported lower-than-expected second-quarter fiscal 2022 results. The company reported non-GAAP earnings of 39 cents per share, which missed the Zacks Consensus Estimate of 41 cents.
Moreover, Mercury Systems’ bottom line declined 27.8% from 54 cents per share reported in the year-ago quarter. The year-over-year decline was mainly due to an unfavorable program mix and increased operating expenses.
Mercury Systems’ non-GAAP revenues of $220.4 million missed the Zacks Consensus Estimate of $223 million. However, it increased 5% year over year, mainly due to contributions from newly acquired businesses.
Quarterly Details
Mercury Systems’ acquired businesses (17% of the total revenues) — Physical Optics Corporation, Pentek, Avalex Technologies and Atlanta Micro — cumulatively contributed $37.5 million to second-quarter revenues. MRCY noted that acquired business revenues were slightly less than expectations due to contracting delays.
Additionally, organic revenues (83% of the total revenues) declined 13% year over year and contributed $183 million to second-quarter sales. The decline was mainly due to contracting delays.
Mercury Systems’ total bookings were $236.9 million, resulting in a 1.08 book-to-bill ratio. The company’s largest bookings in the reported quarter were a classified C2 program, MH-60, P8, CDS, Autumn and F-16.
The company ended the quarter with a backlog of $953.7 million, up $8.4 million on a year-over-year basis. Within the next 12 months, products worth $572.4 million from this order backlog are expected to be shipped.
Operating Details
Mercury Systems’ gross profit was $87.2 million, down 1.6% year over year. Moreover, its gross margin contracted 250 basis points (bps) to 39.6%, mainly due to a negative impact from the inclusion of Physical Optics Corporation and the higher mix of new programs and development work.
Adjusted EBITDA slumped 15.9% year over year to $38.1 million, while margin contracted 420 bps to 17.3%. The decline was mainly due to lower gross margin and negative operating leverage as organic revenues declined year over year.
Total operating expenses increased 24.2% to $87.6 million. SG&A expenses as a percentage of revenues increased 140 bps to 16.4%. Research & development expenses as a percentage of revenues contracted 50 bps to 12.9%.
Balance Sheet & Other Details
As of Dec 31, 2021, MRCY’s cash and cash equivalents were $105.2 million compared with $95.8 million as of Oct 1, 2021. Long-term debt was $451.5 million at the end of the second quarter.
The company generated operating cash flow of $6.8 million in the second quarter and $4.8 million in the first half of fiscal 2022. It generated free cash flow of $10.2 million in the second quarter and $2.8 million in the first half of fiscal 2022.
Guidance
Mercury Systems reiterated its guidance for fiscal 2022. The company continues to expect fiscal 2022 revenues between $1 billion and 1.03 billion. Adjusted EBITDA is expected in the range of $220-$227 million, while adjusted earnings for fiscal 2022 are estimated in the band of $2.51-$2.60 per share.
For the third quarter, Mercury Systems projects revenues between $245 million and $255 million. Adjusted EBITDA is anticipated between $50 million and $53 million. Adjusted earnings are projected in the range of 55-59 cents per share.
Zacks Rank & Stocks to Consider
Mercury Systems currently carries a Zacks Rank #4 (Sell).
Some better-ranked stocks from the broader technology sector include Analog Devices (ADI - Free Report) , CDW Corporation (CDW - Free Report) and Keysight Technologies (KEYS - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Analog Devices’ first-quarter fiscal 2022 earnings has been revised upward by a penny to $1.79 per share over the past 30 days. For fiscal 2022, earnings estimates have moved upward by 1% to $7.53 per share over the past 30 days.
Analog Devices’ earnings beat the Zacks Consensus Estimate in the preceding four quarters, the average surprise being 6.1%. Shares of ADI have rallied 8.9% in the trailing 12 months.
The Zacks Consensus Estimate for CDW Corporation’s first-quarter 2022 earnings has been revised upward by five cents to $1.87 per share over the past 60 days. For 2022, earnings estimates have moved upward 12 cents to $8.73 per share in the past 60 days.
CDW Corporation’s earnings beat the Zacks Consensus Estimate in the preceding four quarters, the average surprise being 12.2%. CDW stock has rallied 37.2% over the past year.
The Zacks Consensus Estimate for Keysight’s first-quarter fiscal 2022 earnings has been revised upward to $1.68 per share from $1.65 60 days ago. For fiscal 2022, earnings estimates have been revised upward by a couple of cents to $6.92 per share in the past 30 days.
Keysight’s earnings beat the Zacks Consensus Estimate in the preceding four quarters, the average surprise being 7.1%. Shares of KEYS have increased 18.3% over the past year.
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Mercury Systems (MRCY - Free Report) shares plunged nearly 9% in Monday’s extended trading session after the aerospace and defense tech firm reported lower-than-expected second-quarter fiscal 2022 results. The company reported non-GAAP earnings of 39 cents per share, which missed the Zacks Consensus Estimate of 41 cents.
Moreover, Mercury Systems’ bottom line declined 27.8% from 54 cents per share reported in the year-ago quarter. The year-over-year decline was mainly due to an unfavorable program mix and increased operating expenses.
Mercury Systems’ non-GAAP revenues of $220.4 million missed the Zacks Consensus Estimate of $223 million. However, it increased 5% year over year, mainly due to contributions from newly acquired businesses.
Quarterly Details
Mercury Systems’ acquired businesses (17% of the total revenues) — Physical Optics Corporation, Pentek, Avalex Technologies and Atlanta Micro — cumulatively contributed $37.5 million to second-quarter revenues. MRCY noted that acquired business revenues were slightly less than expectations due to contracting delays.
Additionally, organic revenues (83% of the total revenues) declined 13% year over year and contributed $183 million to second-quarter sales. The decline was mainly due to contracting delays.
Mercury Systems’ total bookings were $236.9 million, resulting in a 1.08 book-to-bill ratio. The company’s largest bookings in the reported quarter were a classified C2 program, MH-60, P8, CDS, Autumn and F-16.
The company ended the quarter with a backlog of $953.7 million, up $8.4 million on a year-over-year basis. Within the next 12 months, products worth $572.4 million from this order backlog are expected to be shipped.
Operating Details
Mercury Systems’ gross profit was $87.2 million, down 1.6% year over year. Moreover, its gross margin contracted 250 basis points (bps) to 39.6%, mainly due to a negative impact from the inclusion of Physical Optics Corporation and the higher mix of new programs and development work.
Adjusted EBITDA slumped 15.9% year over year to $38.1 million, while margin contracted 420 bps to 17.3%. The decline was mainly due to lower gross margin and negative operating leverage as organic revenues declined year over year.
Total operating expenses increased 24.2% to $87.6 million. SG&A expenses as a percentage of revenues increased 140 bps to 16.4%. Research & development expenses as a percentage of revenues contracted 50 bps to 12.9%.
Balance Sheet & Other Details
As of Dec 31, 2021, MRCY’s cash and cash equivalents were $105.2 million compared with $95.8 million as of Oct 1, 2021. Long-term debt was $451.5 million at the end of the second quarter.
The company generated operating cash flow of $6.8 million in the second quarter and $4.8 million in the first half of fiscal 2022. It generated free cash flow of $10.2 million in the second quarter and $2.8 million in the first half of fiscal 2022.
Guidance
Mercury Systems reiterated its guidance for fiscal 2022. The company continues to expect fiscal 2022 revenues between $1 billion and 1.03 billion. Adjusted EBITDA is expected in the range of $220-$227 million, while adjusted earnings for fiscal 2022 are estimated in the band of $2.51-$2.60 per share.
For the third quarter, Mercury Systems projects revenues between $245 million and $255 million. Adjusted EBITDA is anticipated between $50 million and $53 million. Adjusted earnings are projected in the range of 55-59 cents per share.
Zacks Rank & Stocks to Consider
Mercury Systems currently carries a Zacks Rank #4 (Sell).
Some better-ranked stocks from the broader technology sector include Analog Devices (ADI - Free Report) , CDW Corporation (CDW - Free Report) and Keysight Technologies (KEYS - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Analog Devices’ first-quarter fiscal 2022 earnings has been revised upward by a penny to $1.79 per share over the past 30 days. For fiscal 2022, earnings estimates have moved upward by 1% to $7.53 per share over the past 30 days.
Analog Devices’ earnings beat the Zacks Consensus Estimate in the preceding four quarters, the average surprise being 6.1%. Shares of ADI have rallied 8.9% in the trailing 12 months.
The Zacks Consensus Estimate for CDW Corporation’s first-quarter 2022 earnings has been revised upward by five cents to $1.87 per share over the past 60 days. For 2022, earnings estimates have moved upward 12 cents to $8.73 per share in the past 60 days.
CDW Corporation’s earnings beat the Zacks Consensus Estimate in the preceding four quarters, the average surprise being 12.2%. CDW stock has rallied 37.2% over the past year.
The Zacks Consensus Estimate for Keysight’s first-quarter fiscal 2022 earnings has been revised upward to $1.68 per share from $1.65 60 days ago. For fiscal 2022, earnings estimates have been revised upward by a couple of cents to $6.92 per share in the past 30 days.
Keysight’s earnings beat the Zacks Consensus Estimate in the preceding four quarters, the average surprise being 7.1%. Shares of KEYS have increased 18.3% over the past year.
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
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