Mercury Systems Inc. MRCY recently announced an expansion of its digital processing solutions portfolio. The new EnsembleSeries DCM6111 6U VPX digital transceiver, which incorporates BuiltSECURE technology and is based on the OpenVPX standard, is suitable for advanced electronic warfare applications operating in high threat areas.
Per Mercury, the new device is “the industry’s first digital transceiver optimized for system security engineering (SSE).” In addition to providing multichannel, ultra-low latency performance, the transceiver also has advanced analog to digital converter (ADC) and digital to analog converter (DAC) circuitry.
Expanding Electronic Warfare Portfolio
The DCM6111 transceiver is an important addition to Mercury’s Electronic Warfare segment, contributing 16.8% of the total revenues in third-quarter fiscal 2018. However, segment revenues plunged 45.6% year over year to $19.5 million.
The decline was primarily due to delay in the execution of Surface Electronic Warfare Improvement Program (“SEWIP”) Block 2 from the last reported to current quarter. However, the Electronic Warfare segment bookings jumped 41% year over year, reflecting end-market strength.
Notably, Mercury is involved in two major programs related to SEWIP — SEWIP Block 2 and SEWIP Block 3. Management stated that Block 2 is a well-funded program. The company expects it to be the second-largest revenue program, growing 35% year over year and also the fourth-largest bookings program.
However, SEWIP Block 3 has experienced some delays and is expected to get some funding next year.
Fiscal 2018 Guidance Reiterated
Mercury reported adjusted earnings of 30 cents per share, up 3.4% from the year-ago quarter. Revenues increased 8.4% to $116.3 million. The company completed the acquisition of Themis Computer.
Total bookings were $150.4 million, up 41% from the year-ago quarter, yielding a book-to-bill ratio of 1.29 in the fiscal third quarter. Mercury’s total backlog as of Mar 31, 2018 was $429.3 million, of which $321.0 million represents orders expected to be shipped within the next 12 months.
Mercury noted that budget-related order delays shifted approximately $11 million revenues into the fourth quarter from the last reported quarter. Approximately $8 million was related to the SEWIP Block 2 program.
Adjusted EBITDA was $25.8 million compared with $25.0 million in the year-ago quarter.
Mercury reiterated fiscal 2018 guidance. Revenues, including Themis Computer, are expected between $487.0 million and $492.0 million. The Zacks Consensus Estimate is currently pegged at $489.9 million, reflecting year-over-year growth of 19.9%.
Adjusted EBITDA, including Themis Computer, is expected in the range of $111-$113.5 million. Adjusted earnings are expected to be approximately $1.35-$1.38 per share. The Zacks Consensus Estimate is currently pegged at $1.37 per share, reflecting year-over-year growth of 19.1%.
Mercury Systems Inc. Price and Consensus
Mercury Systems Inc Price and Consensus | Mercury Systems Inc Quote
Zacks Rank & Other Stocks to Consider
Currently, Mercury has a Zacks Rank #2 (Buy).
Other top-ranked stocks in the broader computer & technology sector are Immersion Corp IMMR, Logitech LOGI and NVIDIA NVDA, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Long term earnings growth rate for Immersion, Logitech and NVIDIA is currently pegged at 15%, 8% and 10.25%, respectively.
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