Mercury Systems, Inc. (NASDAQ:MRCY) came out with its second-quarter results last week, and we wanted to see how the business is performing and what top analysts think of the company following this report. Mercury Systems reported US$194m in revenue, roughly in line with analyst forecasts, although statutory earnings per share (EPS) of US$0.29 beat expectations, being 5.1% higher than what analysts expected. This is an important time for investors, as they can track a company's performance in its report, look at what top analysts are forecasting for next year, and see if there has been any change to expectations for the business. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether analysts have changed their mind on Mercury Systems after the latest results.
Taking into account the latest results, the current consensus from Mercury Systems's eight analysts is for revenues of US$789.6m in 2020, which would reflect a solid 9.2% increase on its sales over the past 12 months. Statutory earnings per share are expected to ascend 13% to US$1.36. Yet prior to the latest earnings, analysts had been forecasting revenues of US$787.6m and earnings per share (EPS) of US$1.39 in 2020. So it's pretty clear that, although analysts have updated their estimates, there's been no major change in expectations for the business following the latest results.
Analysts reconfirmed their price target of US$82.67, showing that the business is executing well and in line with expectations. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. There are some variant perceptions on Mercury Systems, with the most bullish analyst valuing it at US$90.00 and the most bearish at US$74.00 per share. Still, with such a tight range of estimates, it suggests analysts have a pretty good idea of what they think the company is worth.
Another way to assess these estimates is by comparing them to past performance, and seeing whether analysts are more or less bullish relative to other companies in the market. It's pretty clear that analysts expect Mercury Systems's revenue growth will slow down substantially, with revenues next year expected to grow 9.2%, compared to a historical growth rate of 25% over the past five years. By way of comparison, other companies in this market with analyst coverage, are forecast to grow their revenue at 5.8% next year. So it's pretty clear that, while Mercury Systems's revenue growth is expected to slow, it's still expected to grow faster than the market itself.
The Bottom Line
The most important thing to take away is that there's been no major change in sentiment, with analysts reconfirming that earnings per share are expected to continue performing in line with their prior expectations. Happily, there were no major changes to revenue forecasts, with analysts still expecting the business to grow faster than the wider market. The consensus price target held steady at US$82.67, with the latest estimates not enough to have an impact on analysts' estimated valuations.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have forecasts for Mercury Systems going out to 2023, and you can see them free on our platform here.
Another thing to consider is whether management and directors have been buying or selling stock recently. We provide an overview of all open market stock trades for the last twelve months on our platform, here.
If you spot an error that warrants correction, please contact the editor at email@example.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.
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