Mercury Systems
MRCY
has been awarded a $17-million order from the Aircraft Division of U.S. Naval Air Warfare Center for Advanced Data Transfer Systems (ADTS) for deployment across multiple rotary-wing and tilt-rotor platforms. The order, which was received in third-quarter fiscal 2021, is anticipated to be delivered over the next few quarters.
Mercury received the order following its acquisition of Physical Optics Corporation. According to the company, this delivery order is part of $84.9 million worth of firm-fixed-price, indefinite-delivery/indefinite-quantity contract award originally received by Physical Optics Corporation in September.
The technology services provider to the aerospace and defense industry has been steadily winning multiple development contracts from the federal government. In December 2020, it won a $14-million order to provide digital signal processing modules for deployment in a multi-mode tactical radar application.
Mercury won back-to-back development contracts in June 2020, one of them being the largest in the company’s history. This highlighted Mercury’s commitment toward addressing complex embedded processing challenges. It received its largest order, a $49-million contract, to provide signal processing and Radio Frequency (RF) solutions for a missile defense program.
Mercury Systems Inc Price and Consensus
Mercury Systems Inc price-consensus-chart
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Mercury Systems Inc Quote
Additionally, it received a $25-million follow-on order to support an advanced naval electronic support application with its integrated RF and digital subsystems. It won a $3.9-million contract to develop a high-density system-in-package solution for radar systems, leveraging its 2.5D chip-scale integration technology.
Mercury’s total bookings at fiscal third quarter-end came in at $210.2 million, reflecting a book-to-bill ratio of 0.82. The company ended the quarter with a backlog of $893.7 million, up $123.9 million from a year ago. From this backlog, $545.5 million worth of products are expected to be shipped within the next 12 months.
Modernization in radar, EW and C4I is high, providing the company with new opportunities in weapon systems, space, avionics processing, and mission computing as well as embedded rugged services.
Mercury’s domain expertise in analog and digital integration has helped it build a solid business relationship with defense prime contractors for a long time.
Yet, pandemic-related modernization delays, changes in administration and customer execution issues are likely to continue impacting the company’s organic revenue growth in the near term.
Additionally, though Mercury has been steadily winning development contracts from the federal government, these low-margin deals are likely to affect profitability. Increased investments to expand the business might weigh on bottom-line results.
Zacks Rank & Key Picks
Currently, Mercury carries a Zacks Rank #5 (Strong Sell).
Some better-ranked stocks in the broader technology sector include
Microsoft
MSFT
,
Cadence Design Systems
CDNS
and
Texas Instruments
TXN
, each carrying a Zacks Rank of 2 (Buy), at present. You can see
the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here
.
Long-term earnings growth rate for Microsoft, Cadence Design and Texas Instruments is currently pegged at 11.1%, 11.7% and 9.3%, respectively.
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