It has been about a month since the last earnings report for Mercury Systems (
MRCY Quick Quote MRCY - Free Report) . Shares have lost about 6.5% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Mercury Systems due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Mercury Q2 Earnings & Revenues Top Estimates, Up Y/Y
Mercury Systems reported second-quarter fiscal 2021 non-GAAP earnings of 54 cents per share, beating the Zacks Consensus Estimate by 8%. The figure also marks improvement from the year-ago quarter’s earnings of 53 cents per share by a penny.
Revenues of $210.7 million also surpassed the consensus mark of $209.7 million as well as increased 8.7% year over year on robust organic growth.
Organic revenues (99.8% of total revenues) went up 9% to $210.5 million in the reported quarter.
Moreover, acquired revenues (0.2% of total revenues) came in at $0.22 million.
Mercury's total bookings at the end of the fiscal second quarter came in at $210.1 million, reflecting a 1 book-to-bill ratio. The company ended the quarter with a backlog of $945.3 million, up $217.8 million year over year. From this backlog, $598 million worth of products are expected to be shipped within the next 12 months.
Gross margin in the fiscal second quarter shrunk 350 basis points (bps) year on year to 42.1%.
Adjusted EBITDA climbed 5.8% year over year to $45.3 million. However, adjusted EBITDA margin contracted 60 bps year on year to 21.5%.
Selling, general & administrative expenses as a percentage of revenues shrunk 190 bps year over year to 15%.
However, research & development expenses as a percentage of revenues expanded 70 bps to 13.4%.
Operating margin contracted 210 bps year on year to 8.6%.
Balance Sheet and Cash Flow
Mercury had cash and cash equivalents of $109.1 million as of Jan1, 2021, down from the $239.1 million witnessed at the end of the previous quarter.
The company generated $23.9 million of cash flow from operating activities. Free cash flow was $10.2 million. During the first half of fiscal 2021, the company generated $46.9 million of operating cash flow and $22.1 million of free cash flow.
For the third quarter of fiscal 2021, revenues are projected at $245-$255 million.
Adjusted EBITDA is anticipated in the band of $52-$54.5 million. Adjusted earnings are estimated to be 59-63 cents per share.
Mercury raised its full-year revenue guidance to $925-$945 million from $865-$885 million.
The adjusted EBITDA forecast has also been raised to $201-$206 million from the $190-$196 million projected earlier. Adjusted earnings are now estimated to be $2.35-$2.42 per share, up from the previous expectation of $2.20-$2.28 per share.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision flatlined during the past month.
Currently, Mercury Systems has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. However, 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 D. If you aren't focused on one strategy, this score is the one you should be interested in.
Mercury Systems has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.