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Mercury Systems, Inc. Beat Analyst Estimates: See What The Consensus Is Forecasting For Next Year

Simply Wall St
·3 mins read

Mercury Systems, Inc. (NASDAQ:MRCY) defied analyst predictions to release its third-quarter results, which were ahead of market expectations. The company beat both earnings and revenue forecasts, with revenue of US$208m, some 4.4% above estimates, and statutory earnings per share (EPS) coming in at US$0.43, 38% ahead of expectations. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.

Check out our latest analysis for Mercury Systems

NasdaqGS:MRCY Past and Future Earnings May 4th 2020
NasdaqGS:MRCY Past and Future Earnings May 4th 2020

Taking into account the latest results, the most recent consensus for Mercury Systems from eight analysts is for revenues of US$885.2m in 2021 which, if met, would be a notable 17% increase on its sales over the past 12 months. Statutory earnings per share are predicted to shoot up 21% to US$1.62. Before this earnings report, the analysts had been forecasting revenues of US$880.8m and earnings per share (EPS) of US$1.59 in 2021. So the consensus seems to have become somewhat more optimistic on Mercury Systems' earnings potential following these results.

The consensus price target rose 13% to US$92.78, suggesting that higher earnings estimates flow through to the stock's valuation as well. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. There are some variant perceptions on Mercury Systems, with the most bullish analyst valuing it at US$110 and the most bearish at US$83.00 per share. Still, with such a tight range of estimates, it suggeststhe analysts have a pretty good idea of what they think the company is worth.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Mercury Systems' past performance and to peers in the same industry. We would highlight that Mercury Systems' revenue growth is expected to slow, with forecast 17% increase next year well below the historical 25%p.a. growth over the last five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 3.1% next year. So it's pretty clear that, while Mercury Systems' revenue growth is expected to slow, it's still expected to grow faster than the industry itself.

The Bottom Line

The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Mercury Systems' earnings potential next year. Happily, there were no major changes to revenue forecasts, with the business still expected to grow faster than the wider industry. There was also a nice increase in the price target, with the analysts clearly feeling that the intrinsic value of the business is improving.

Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have forecasts for Mercury Systems going out to 2023, and you can see them free on our platform here.

Don't forget that there may still be risks. For instance, we've identified 2 warning signs for Mercury Systems that you should be aware of.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.