A month has gone by since the last earnings report for Mercury Systems (MRCY Quick QuoteMRCY - Free Report) . Shares have added about 5.6% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Mercury Systems due for a pullback? 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 Systems Q3 Earnings & Revenues Miss Estimates

Mercury Systems reported third-quarter fiscal 2024 results, wherein both the top and bottom lines missed the Zacks Consensus Estimate.

The aerospace and defense tech firm reported a non-GAAP loss of 26 cents per share, wider than the Zacks Consensus Estimate of a loss of 15 cents. The bottom line plunged 165% year over year, mainly due to increased costs and higher interest expenses.

Mercury Systems’ non-GAAP revenues decreased 21% to $208.26 million from $263.5 million reported in the year-ago quarter. The top line missed the consensus mark of $212 million.

Q3 in Details

Mercury Systems’ total bookings were $219.9 million, resulting in a 1.06 book-to-bill ratio.

The company ended the quarter with a backlog of $1.29 billion, which increased $190.5 million from the year-ago quarter’s figure. Within the next 12 months, products worth $761.2 million from this order backlog are expected to be recognized as revenues.

Mercury Systems’ gross profit was $40.6 million, down 55% year over year. Moreover, its gross margin contracted 1,480 basis points (bps) to 19.5%.

Total operating expenses decreased 2.3% to $86.3 million. As a percentage of revenues, operating expenses increased 790 bps to 41.4% from 33.5% in the year-ago quarter.

The company reported a negative adjusted EBITDA of $2.4 million against an adjusted EBITDA of $43.5 million in the prior-year quarter. The margin decreased 1,760 bps to 1.2%, primarily due to a lower gross margin and higher operating expenses as a percentage of revenues.

Balance Sheet & Cash Flow

As of Mar 29, 2024, MRCY’s cash and cash equivalents were $142.6 million compared with $168.6 million as of Dec 29, 2023. The long-term debt as of Mar 29, 2024, was $616.5 million.

The company used $17.8 million in cash for operational activities in the third quarter of fiscal 2024 compared with $3.2 million in the year-ago quarter. MRCY generated a negative free cash flow of $25.7 million compared with a negative $12.7 million in the year-ago quarter.

Guidance

For fiscal 2024, Mercury Systems expects revenues between $800 million and $850 million. It estimates adjusted EBITDA margins in mid-20 percent.

The company forecasts fiscal 2024 bookings to exceed $1 billion. It estimates positive free cash flow for the fiscal year.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month.

The consensus estimate has shifted -34.04% due to these changes.

VGM Scores

At this time, Mercury Systems has a poor Growth Score of F, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Mercury Systems has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Mercury Systems is part of the Zacks Computer - Peripheral Equipment industry. Over the past month, Logitech (LOGI Quick QuoteLOGI - Free Report) , a stock from the same industry, has gained 18.5%. The company reported its results for the quarter ended March 2024 more than a month ago.

Logitech reported revenues of $1.01 billion in the last reported quarter, representing a year-over-year change of +5.4%. EPS of $0.99 for the same period compares with $0.50 a year ago.

For the current quarter, Logitech is expected to post earnings of $0.89 per share, indicating a change of +36.9% from the year-ago quarter. The Zacks Consensus Estimate has changed +3.3% over the last 30 days.

Logitech has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of B.