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Mercury Systems (MRCY) Moves 10.3% Higher: Will This Strength Last?

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Mercury Systems (MRCY - Free Report) shares soared 10.3% in the last trading session to close at $55.92. The move was backed by solid volume with far more shares changing hands than in a normal session. This compares to the stock's 12.2% gain over the past four weeks.

The upswing came after activist investor, JANA Partners LLC, revealed acquiring a 6.6% stake in the aerospace and defense contractor. In a filing with the U.S. Securities And Exchange Commission ("SEC") under Schedule 13D, JANA Partners revealed buying roughly 3.73 million common stocks of Mercury Systems for approximately $181.1 million, with an option to purchase additional 173,300 shares.

In the filing with SEC, JANA Partners said that it intends to have discussions with Mercury Systems’ management to consider ways to maximize shareholder value. The discussion would be aimed at evaluating strategic alternatives including the company’s sale, corporate governance or board composition and compensation.

This maker of processing systems and software is expected to post quarterly earnings of $0.41 per share in its upcoming report, which represents a year-over-year change of -24.1%. Revenues are expected to be $222.96 million, up 5.8% from the year-ago quarter.

Earnings and revenue growth expectations certainly give a good sense of the potential strength in a stock, but empirical research shows that trends in earnings estimate revisions are strongly correlated with near-term stock price movements.

For Mercury Systems, the consensus EPS estimate for the quarter has been revised 0.8% higher over the last 30 days to the current level. And a positive trend in earnings estimate revision usually translates into price appreciation. So, make sure to keep an eye on MRCY going forward to see if this recent jump can turn into more strength down the road.

The stock currently carries a Zacks Rank 3 (Hold). You can see the complete list of today's Zacks Rank #1 (Strong Buy) stocks here >>>>

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