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Mercury Systems (MRCY) Beats Q3 Earnings & Revenue Estimates
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Mercury Systems (MRCY - Free Report) 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.
One-Year Price Performance
Image Source: Zacks Investment Research
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.
Zacks Rank & Stocks to Consider
Mercury Systems currently carries a Zacks Rank #4 (Sell). Shares of MRCY have fallen 20.5% in the past year.
The Zacks Consensus Estimate for Semtech's first-quarter fiscal 2023 earnings has been revised to 76 cents per share from 70 cents over the past 60 days. For fiscal 2023, earnings estimates have moved north by 8% to $3.38 per share in the past 60 days.
Semtech's earnings beat the Zacks Consensus Estimate in the preceding four quarters, the average surprise being 2.8%. Shares of SMTC have fallen 2.1% in the past year.
The Zacks Consensus Estimate for Gogo's first-quarter 2022 earnings has been revised downward by a penny to 13 cents per share over the past 30 days. For 2022, Gogo's earnings estimates have moved north by 25% to 65 cents per share in the past 60 days.
Gogo's earnings beat the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 65%. Shares of GOGO have soared 74.5% in the past year.
The Zacks Consensus Estimate for Analog Devices' second-quarter fiscal 2022 earnings has been revised upward by 4 cents to $2.12 per share over the past 30 days. For fiscal 2022, earnings estimates have moved north by 11 cents to $8.43 per share in the past 30 days.
Analog Devices' earnings beat the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 6%. Shares of ADI have increased 4.6% in the past year.
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Mercury Systems (MRCY) Beats Q3 Earnings & Revenue Estimates
Mercury Systems (MRCY - Free Report) 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.
One-Year Price Performance
Image Source: Zacks Investment Research
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.
Zacks Rank & Stocks to Consider
Mercury Systems currently carries a Zacks Rank #4 (Sell). Shares of MRCY have fallen 20.5% in the past year.
Some better-ranked stocks from the broader technology sector are Semtech (SMTC - Free Report) , Gogo (GOGO - Free Report) and Analog Devices (ADI - Free Report) . Semtech and Gogo each sport a Zacks Rank #1 (Strong Buy), while Analog Devices carries a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Semtech's first-quarter fiscal 2023 earnings has been revised to 76 cents per share from 70 cents over the past 60 days. For fiscal 2023, earnings estimates have moved north by 8% to $3.38 per share in the past 60 days.
Semtech's earnings beat the Zacks Consensus Estimate in the preceding four quarters, the average surprise being 2.8%. Shares of SMTC have fallen 2.1% in the past year.
The Zacks Consensus Estimate for Gogo's first-quarter 2022 earnings has been revised downward by a penny to 13 cents per share over the past 30 days. For 2022, Gogo's earnings estimates have moved north by 25% to 65 cents per share in the past 60 days.
Gogo's earnings beat the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 65%. Shares of GOGO have soared 74.5% in the past year.
The Zacks Consensus Estimate for Analog Devices' second-quarter fiscal 2022 earnings has been revised upward by 4 cents to $2.12 per share over the past 30 days. For fiscal 2022, earnings estimates have moved north by 11 cents to $8.43 per share in the past 30 days.
Analog Devices' earnings beat the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 6%. Shares of ADI have increased 4.6% in the past year.