We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Mercury Systems (MRCY) Plunges 12% on Q2 Loss, Sales Decline
Read MoreHide Full Article
Mercury Systems’ (MRCY - Free Report) shares plunged 12% during Tuesday’s extended trading session after the company reported lower-than-expected second-quarter fiscal 2024 results.
The aerospace and defense tech firm reported a non-GAAP loss of 42 cents per share, in contrast to the Zacks Consensus Estimate of earnings of 7 cents per share. The bottom line also compared unfavorably with the year-ago quarter’s earnings of 26 cents per share, mainly due to lower revenues, increased costs and higher manufacturing adjustments.
Mercury Systems’ second-quarter non-GAAP revenues decreased 14% to $197.5 million compared with $229.6 million reported in the year-ago quarter. The top line also missed the consensus mark of $215.4 million.
The dismal top-line performance was negatively impacted by the company’s planned business transition initiatives, under which it is focusing on shifting a high mix of development programs to production and converting a high level of working capital into significant cash flows.
Mercury Systems Inc Price, Consensus and EPS Surprise
Mercury Systems’ total bookings were $325.4 million in the second quarter, resulting in a 1.65 book-to-bill ratio.
The company ended the quarter with a backlog of $1.28 billion, up $160.7 million on a year-over-year basis. Within the next 12 months, products worth $786.4 million from this order backlog are expected to be recognized.
Mercury Systems’ gross profit was $31.5 million, down 61% year over year. Moreover, its gross margin contracted to 16% from 35.3% in the year-ago quarter. The decline in gross profit and margin was primarily due to increased costs and higher manufacturing adjustments mainly related to inventory reserves and scrap.
Total operating expenses decreased 3.5% to $85.4 million. However, as a percentage of revenues, operating expenses increased 470 basis points to 43.3% from 38.6% in the year-ago quarter.
The company reported a negative adjusted EBITDA of $21.3 million. In the year-ago quarter, the company reported an adjusted EBITDA of $35.7 million.
Balance Sheet & Cash Flow
As of Dec 29, 2023, MRCY’s cash and cash equivalents were $168.6 million compared with $89.4 million as of Sep 29, 2023. The long-term debt as of Dec 29, 2023, was $616.5 million.
The company’s cash flow was $45.5 million from operational activities in the second quarter of fiscal 2024 compared with $35.4 million in the second quarter of fiscal 2023. Mercury generated a free cash flow of $37.5 million in the second quarter compared with $22.2 million in the year-ago quarter.
Guidance
For fiscal 2024, Mercury Systems has revised its guidance. It now expects revenues between $800 million and $850 million, down from the previously forecasted guidance of $950 million to 1 billion.
The reduction is because of MRCY's dismal performance in the first half of fiscal 2024, primarily due to the negative impact of business transition and increased program costs. The company expects lower volumes in the second half as it focuses on advancing challenged and late-stage development programs and reducing working capital, particularly related to unbilled receivables.
However, the company expects its full-year bookings to exceed $1 billion in 2024.
Zacks Rank and Stocks to Consider
Currently, Mercury Systems has a Zacks Rank #5 (Strong Sell). Shares of MRCY have plunged 44.6% in the past year.
The Zacks Consensus Estimate for BlackLine’s fourth-quarter 2023 earnings has been revised by a penny northward to 55 cents per share in the past 30 days. Shares of BL have lost 20.1% in the past year.
The Zacks Consensus Estimate for Arista’s fourth-quarter 2023 earnings has been revised by a penny northward to $1.70 per share in the past 90 days. Shares of ANET have rallied 96.3% in the past year.
The Zacks Consensus Estimate for DELL's fourth-quarter 2024 earnings per share has been revised northward to $1.73 in the past 30 days. Shares of DELL have surged 96.1% in the past year.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Mercury Systems (MRCY) Plunges 12% on Q2 Loss, Sales Decline
Mercury Systems’ (MRCY - Free Report) shares plunged 12% during Tuesday’s extended trading session after the company reported lower-than-expected second-quarter fiscal 2024 results.
The aerospace and defense tech firm reported a non-GAAP loss of 42 cents per share, in contrast to the Zacks Consensus Estimate of earnings of 7 cents per share. The bottom line also compared unfavorably with the year-ago quarter’s earnings of 26 cents per share, mainly due to lower revenues, increased costs and higher manufacturing adjustments.
Mercury Systems’ second-quarter non-GAAP revenues decreased 14% to $197.5 million compared with $229.6 million reported in the year-ago quarter. The top line also missed the consensus mark of $215.4 million.
The dismal top-line performance was negatively impacted by the company’s planned business transition initiatives, under which it is focusing on shifting a high mix of development programs to production and converting a high level of working capital into significant cash flows.
Mercury Systems Inc Price, Consensus and EPS Surprise
Mercury Systems Inc price-consensus-eps-surprise-chart | Mercury Systems Inc Quote
Key Metrics
Mercury Systems’ total bookings were $325.4 million in the second quarter, resulting in a 1.65 book-to-bill ratio.
The company ended the quarter with a backlog of $1.28 billion, up $160.7 million on a year-over-year basis. Within the next 12 months, products worth $786.4 million from this order backlog are expected to be recognized.
Mercury Systems’ gross profit was $31.5 million, down 61% year over year. Moreover, its gross margin contracted to 16% from 35.3% in the year-ago quarter. The decline in gross profit and margin was primarily due to increased costs and higher manufacturing adjustments mainly related to inventory reserves and scrap.
Total operating expenses decreased 3.5% to $85.4 million. However, as a percentage of revenues, operating expenses increased 470 basis points to 43.3% from 38.6% in the year-ago quarter.
The company reported a negative adjusted EBITDA of $21.3 million. In the year-ago quarter, the company reported an adjusted EBITDA of $35.7 million.
Balance Sheet & Cash Flow
As of Dec 29, 2023, MRCY’s cash and cash equivalents were $168.6 million compared with $89.4 million as of Sep 29, 2023. The long-term debt as of Dec 29, 2023, was $616.5 million.
The company’s cash flow was $45.5 million from operational activities in the second quarter of fiscal 2024 compared with $35.4 million in the second quarter of fiscal 2023. Mercury generated a free cash flow of $37.5 million in the second quarter compared with $22.2 million in the year-ago quarter.
Guidance
For fiscal 2024, Mercury Systems has revised its guidance. It now expects revenues between $800 million and $850 million, down from the previously forecasted guidance of $950 million to 1 billion.
The reduction is because of MRCY's dismal performance in the first half of fiscal 2024, primarily due to the negative impact of business transition and increased program costs. The company expects lower volumes in the second half as it focuses on advancing challenged and late-stage development programs and reducing working capital, particularly related to unbilled receivables.
However, the company expects its full-year bookings to exceed $1 billion in 2024.
Zacks Rank and Stocks to Consider
Currently, Mercury Systems has a Zacks Rank #5 (Strong Sell). Shares of MRCY have plunged 44.6% in the past year.
Some better-ranked stocks from the broader technology sector are BlackLine (BL - Free Report) , Arista Networks (ANET - Free Report) and Dell Technologies (DELL - Free Report) , each sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for BlackLine’s fourth-quarter 2023 earnings has been revised by a penny northward to 55 cents per share in the past 30 days. Shares of BL have lost 20.1% in the past year.
The Zacks Consensus Estimate for Arista’s fourth-quarter 2023 earnings has been revised by a penny northward to $1.70 per share in the past 90 days. Shares of ANET have rallied 96.3% in the past year.
The Zacks Consensus Estimate for DELL's fourth-quarter 2024 earnings per share has been revised northward to $1.73 in the past 30 days. Shares of DELL have surged 96.1% in the past year.