A month has gone by since the last earnings report for Mercury Systems (MRCY Quick QuoteMRCY - Free Report) . Shares have lost about 11.9% 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 drivers.

Mercury Q2 Earnings & Revenues Beat Estimates

Mercury Systems reported second-quarter fiscal 2025 results, wherein the top and bottom lines beat the Zacks Consensus Estimate.

The aerospace and defense tech firm reported non-GAAP earnings of 7 cents per share, surpassing the Zacks Consensus Estimate of a loss of 8 cents. The bottom line skyrocketed 116.7% year over year.

Mercury Systems’ non-GAAP revenues increased 13% year over year to $223.1 million. The top line beat the consensus mark by 23.60%.

MRCY shares rose 18.75% in the after-hours trading, following solid progress in each of the priority focus areas, highlighted by solid execution across a broad portfolio of production and development programs, and a record backlog that helped drive positive operating leverage.

MRCY's Operating Details

Mercury Systems’ total bookings were $242.4 million, yielding a book-to-bill ratio of 1.09 for the quarter.

MRCY’s total backlog as of Dec. 27, 2024, was $1.4 billion, reflecting an increase of $80 million from the year-ago quarter. As of Dec. 28, 2024, a total backlog of $789.9 million represented orders expected to be recognized as revenues within the next 12 months.

Mercury Systems’ gross profit was $60.8 million, up 93% year over year. Its gross margin expanded from 16% in the prior-year period to 27.3%.

Research and development (R&D) expenses decreased 25% year over year to $21.4 million. As a percentage of revenues, R&D expenses decreased 480 bps year over year to 9.6%.

Selling, general and administrative (SG&A) expenses decreased 8.9% year over year to $40.5 million. As a percentage of revenues, SG&A expenses decreased 440 bps year over year to 18.2%.

Total operating expenses decreased 14.3% to $73.2 million. As a percentage of revenues, operating expenses decreased by 1040 basis points to 32.8%.

The company reported an adjusted EBITDA of $22 million, up 203.4% year over year. The margin expanded 2070 basis points to 9.9%.

MRCY’s Balance Sheet & Cash Flow

As of Dec. 27, 2024, the company’s cash and cash equivalents were $242.6 million compared with $158.1 million as of Sept. 27, 2024. The long-term debt as of Dec. 27, 2024, was $591.5 million.
Cash flows provided by operating activities in the second quarter of fiscal 2025 were $85.5 million compared with $45.5 million in the year-ago quarter.

The free cash flow was $81.9 million for the second quarter of fiscal 2025 compared with $37.5 million in the year-ago period.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

The consensus estimate has shifted -29.03% due to these changes.

VGM Scores

Currently, Mercury Systems has a great Growth Score of A, though it is lagging a bit on the Momentum Score front 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 B. 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 #2 (Buy). We expect an above average return from the stock in the next few months.