Mercury Systems, Inc. MRCY is constantly upping efforts to widen its reach in the C4I market, resulting in big contract wins within this space.
Recently, the company received a $2.8 million order from a major defense prime contractor to provide its modular EnterpriseSeries rackmount servers for a naval weapon system. The initial order has been placed in the current quarter, and is likely to be shipped over the next few quarters.
The servers involved in the contract are built for mission critical applications. Scott Orton, Vice President and General Manager of Mercury's Trusted Mission Solutions group said, “Designed to meet both current and future deployment needs, our composable servers not only minimize cost but also offer long-term sustainability.”
Rationale Behind Focus on C4I Market
Mercury, through acquisitions and organic expansion, has broadened its exposure in the C4I market, which encompasses avionics, command and control, electronic warfare (EW), and dedicated communications. The acquisitions of Thermis and Germane last year were in this line.
Additionally, Mercury also announced the buyout of GECO Avionics recently, as part of its push in the C4I market.
The company’s continued efforts and investments, which have resulted in successful completion of deals, have created about $800 million worth of potential C4I opportunity based on the estimated lifetime value of its top 30 programs.
In the last reported quarter, Mercury’s revenues from C4I rallied a whopping 249% year over year and comprised 30% of total revenues.
Management noted that the C4I market is growing faster than the overall defense space, which is encouraging the company to increase its stronghold in it.
Moreover, per Zion Market Research, the C4ISR market (Communication, Command & Control, Computers, Intelligence, Surveillance & Reconnaissance, and EW) is expected to witness a CAGR of 3.6% during the period between 2018 and 2024 to hit $127.2 billion globally.
Mercury’s Expanding EW Portfolio
As part of its C4I efforts, Mercury has been focused on the EW segment with new innovations and products. It recently launched the EnsembleSeries DCM6111 6U VPX digital transceiver, which incorporates BuiltSECURE technology and is based on the OpenVPX standard. It is suitable for advanced electronic warfare applications operating in high threat areas.
Notably, Mercury is involved in two major programs related to SEWIP (Surface Electronic Warfare Improvement Program)— SEWIP Block 2 and SEWIP Block 3. Management stated that Block 2 is a well-funded program, and is expected to be one of the largest revenue drivers.
Increasing efforts, continued deal wins and expanding product portfolio position Mercury well to take advantage of the opportunities provided by the growing demand in the C4I market.
Mercury Systems Inc Revenue (TTM)
Mercury Systems Inc Revenue (TTM) | Mercury Systems Inc Quote
Zacks Rank & Other Key Picks
Mercury currently has a Zacks Rank #1 (Strong Buy).
A few other top-ranked stocks in the broader Computer and Technology sector are Fortinet, Inc. FTNT, Synopsys, Inc. SNPS and eGain Corporation EGAN, each sporting a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term earnings growth for Fortinet, Synopsys and eGain is projected to be 16.75%, 10% and 30%, respectively.
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