Why Is Mercury Systems (MRCY) Down 6% Since Last Earnings Report?

It has been about a month since the last earnings report for Mercury Systems (MRCY). Shares have lost about 6% 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 catalysts. Mercury Systems' Q1 Earnings & Revenues Beat Estimates, Rise Y/YMercury Systems reported first-quarter fiscal 2025 results, wherein both top and bottom lines beat the Zacks Consensus Estimate.The aerospace and defense tech firm reported non-GAAP earnings of 4 cents per share against the Zacks Consensus Estimate of a loss of 13 cents. The bottom line surged 116.7% year over year.Mercury Systems’ non-GAAP revenues increased 13% year over year to $204.4 million. The top line beat the consensus mark by 12.9%. MRCY’s earnings beat the Zacks Consensus Estimate once in the last four quarters and lagged in the remaining three, delivering an average negative surprise of 148.69%.The results reflected solid progress in each of the priority focus areas, with highlights that include reducing operating expenses, aiding increased positive operating leverage and improving the execution across all product offerings, especially the Common Processing Architecture area.MRCY’s Q1 in DetailsMercury Systems’ total bookings were up 29% year over year to $247.7 million, yielding a book-to-bill ratio of 1.21 for the quarter. MRCY’s total backlog as of Sept. 27, 2024, was $1.34 billion, reflecting an increase of $187.8 million from the year-ago quarter’s reported figure. As of Sept. 27, 2024, the total backlog of $777 million represented orders expected to be recognized as revenues within the next 12 months.Mercury Systems’ gross profit was $51.79 million, up 2.5% year over year. Moreover, its gross margin contracted 258 basis points (bps) to 25.3%.Total operating expenses decreased 28.12% year over year to $65.2 million due to streamlined operations. As a percentage of revenues, operating expenses contracted 1823 bps to 31.9%.The company reported an adjusted EBITDA of $21.45 million, up 996% year over year. The margin expanded 941 bps to 10.49% due to the execution of development programs to minimize cost growth, increase organic growth and move closer to a 20:80 ratio of development to production program.Balance Sheet & Cash Flow of MRCYAs of Sept. 27, 2024, MRCY’s cash and cash equivalents were $158.12 million compared with $180.52 million as of June 28, 2024. The long-term debt as of Sept. 27, 2024, was $591.5 million.Cash flows used in operating activities in the first quarter of fiscal 2025 were $14.7 million compared with $39.1 million in the year-ago quarter. Negative free cash flow was $20.9 million for the first quarter of fiscal 2025 compared with negative free cash flow of $47.1 million in the year-ago period.How Have Estimates Been Moving Since Then?In the past month, investors have witnessed an upward trend in estimates revision.The consensus estimate has shifted 13.39% due to these changes.VGM ScoresAt this time, Mercury Systems has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. 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 D. If you aren't focused on one strategy, this score is the one you should be interested in.OutlookEstimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Mercury Systems has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.Performance of an Industry PlayerMercury Systems belongs to the Zacks Aerospace - Defense Equipment industry. Another stock from the same industry, Spirit Aerosystems (SPR), has gained 6% over the past month. More than a month has passed since the company reported results for the quarter ended September 2024.Spirit Aerosystems reported revenues of $1.47 billion in the last reported quarter, representing a year-over-year change of +2.2%. EPS of -$3.03 for the same period compares with -$1.42 a year ago.Spirit Aerosystems is expected to post a loss of $1.47 per share for the current quarter, representing a year-over-year change of -406.3%. Over the last 30 days, the Zacks Consensus Estimate has changed +5.2%.The overall direction and magnitude of estimate revisions translate into a Zacks Rank #5 (Strong Sell) for Spirit Aerosystems. Also, the stock has a VGM Score of F.5 Stocks Set to DoubleEach was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2024. While not all picks can be winners, previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%.Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.Today, See These 5 Potential Home Runs >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Mercury Systems Inc (MRCY): Free Stock Analysis Report Spirit Aerosystems Holdings, Inc. (SPR): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks