Mercury Systems (MRCY) Falls 11% as Q4 Earnings Miss Estimates
Mercury Systems MRCY plunged 10.7% during Tuesday’s extended trading session after it reported lower-than-expected financial results for the fourth quarter of fiscal 2023. Also, the top and bottom lines marked a significant year-over-year decline.
The aerospace and defense tech firm reported non-GAAP earnings of 11 cents per share, missing the Zacks Consensus Estimate of 54 cents, and fell short of the company’s guidance range of 47-61 cents. The bottom line declined 86.4% year over year, mainly due to lower revenues, reduced gross profit and higher interest expenses.
Mercury Systems’ fourth-quarter non-GAAP revenues decreased 12.6% to $253.2 million compared with $289.7 million reported in the year-ago quarter. The top line missed the consensus mark of $277.3 million and came in lower than management’s guided range of $269.3-$289.3 million.
Mercury Systems Inc Price, Consensus and EPS Surprise
Mercury Systems Inc price-consensus-eps-surprise-chart | Mercury Systems Inc Quote
Fourth-Quarter in Detail
Mercury Systems’ total bookings were $293.8 million, resulting in a 1.16 book-to-bill ratio.
The company ended the quarter with a backlog of $1.14 billion, up $102.1 million on a year-over-year basis. Within the next 12 months, products worth $716.4 million from this order backlog are expected to be shipped.
Mercury Systems’ gross profit was $67.4 million, down 43.6% year over year. Moreover, its gross margin contracted to 26.6% from 41.3% in the year-ago quarter.
Total operating expenses decreased 17% to $76.3 million. As a percentage of revenues, operating expenses declined 160 bps to 30.1% from 31.7% in the year-ago quarter.
Adjusted EBITDA plunged 69.4% year over year to $21.9 million. The margin decreased to 8.6% from 24.7% in the year-ago quarter due to a lower gross margin, partially offset by the reduction in operating expenses as a percentage of revenues.
Balance Sheet & Cash Flow
As of Jun 30, 2023, MRCY’s cash and cash equivalents were $71.6 million compared with $64.4 million as of Mar 31, 2023. The long-term debt as of Jun 30, 2023 was $511.5 million.
In the fourth quarter, the company generated operating cash flow of $12.6 million and free cash flow of $3.8 million. In fiscal 2023, it used $21.3 million of cash for operational activities and had free cash flow of -$60.1 million.
Guidance
For fiscal 2024, Mercury Systems expects revenues between $950 million and $1 billion. It estimates adjusted EBITDA in the range of $160-$185 million.
Mercury forecasts fiscal 2023 adjusted earnings in the $1.14-$1.48 per share band.
Zacks Rank & Key Picks
Currently, Mercury Systems carries a Zacks Rank #5 (Strong Sell). Shares of MRCY have plunged 24.4% year to date (YTD).
Some better-ranked stocks from the broader technology sector are NVIDIA NVDA, Airbnb ABNB and Salesforce CRM. NVIDIA sports a Zacks Rank #1 (Strong Buy), while Airbnb and Salesforce each carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today's Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for NVIDIA's second-quarter fiscal 2024 earnings has been revised upward by a couple of cents to $2.06 per share in the past 60 days. For fiscal 2024, earnings estimates have increased by 2 cents to $7.79 per share in the past 30 days.
NVIDIA’s earnings beat the Zacks Consensus Estimate twice in the preceding four quarters while missing the same on two occasions, the average surprise being 0.3%. Shares of NVDA have surged 200.7% YTD.
The Zacks Consensus Estimate for Airbnb’s third-quarter 2023 earnings has been revised 8 cents northward to $2.03 per share in the past 30 days. For 2023, earnings estimates have moved 4 cents upward to $3.66 per share in the past seven days.
Airbnb’s earnings beat the Zacks Consensus Estimate in the preceding four quarters, the average surprise being 52.6%. Shares of ABNB have rallied 51.9% YTD.
The Zacks Consensus Estimate for Salesforce's second-quarter fiscal 2024 earnings has remained unchanged at $1.90 per share in the past 60 days. For fiscal 2024, earnings estimates have remained unchanged at $7.44 per share in the past 60 days.
Salesforce's earnings beat the Zacks Consensus Estimate in the preceding four quarters, the average surprise being 15.5%. Shares of CRM have surged 57.5% YTD.
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