Mercury Systems' Q3 Earnings Meet Estimates, Revenues Rise Y/Y

Mercury Systems MRCY reported third-quarter fiscal 2025 results, wherein earnings were in line with the Zacks Consensus Estimate and revenues beat the same.

The aerospace and defence technology provider reported non-GAAP earnings of 6 cents per share, in line with the Zacks Consensus Estimate. The company had incurred a loss of 26 cents in the year-ago quarter.

Mercury’s non-GAAP revenues increased 1.5% year over year to $211.4 million. The top line beat the consensus mark by 4.07%.

MRCY shares were more or less unchanged in pre-market trading, despite solid progress in each of the priority focus areas, driven by solid execution across a broad portfolio of production and development programs. 

Mercury shares have outperformed the Zacks Aerospace sector and peers, including  Spirit Aerosystems SPR and CAE CAE year to date (YTD). MRCY shares have gained 20% YTD compared with the sector, Spirit Aerosystems and CAE’s growth of 8.1%, 4.9% and 0.2%, respectively.

MRCY's Q3 Operating Details

Mercury’s total bookings were $200.4 million, yielding a book-to-bill ratio of 0.95 for the reported quarter. MRCY’s total backlog as of March 28, 2025, was $1.34 billion, reflecting an increase of $51 million from the year-ago quarter. As of March 28, 2025, total backlog of $787.6 million represented orders expected to be recognized as revenues within the next 12 months.

Mercury’s gross profit was $57.1 million, up 40.5% year over year. The company’s gross margin expanded from 19.5% in the year-ago quarter to 27%.

Research and development (R&D) expenses decreased 25.9% year over year to $16 million. As a percentage of revenues, R&D expenses decreased 280 basis points (bps) year over year to 7.56%. Selling, general and administrative (SG&A) expenses decreased 0.3% year over year to $43 million. As a percentage of revenues, SG&A expenses decreased 40 bps year over year to 20.4%.

Total operating expenses decreased 13.7% to $74.5 million. As a percentage of revenues, operating expenses decreased 620 bps on a year-over-year basis to 35.3%.

Mercury reported an adjusted EBITDA of $24.7 million against a negative EBITDA of $2.397 million in the year-ago quarter.

MRCY’s Balance Sheet & Cash Flow

As of March 28, 2025, MRCY’s cash and cash equivalents were $269.8 million compared with $242.6 million as of Dec. 27, 2024. The long-term debt as of March 27, 2025, was $591.5 million.

Cash flows provided by operating activities in the third quarter of fiscal 2025 were $30 million compared with $85.5 million in the second quarter of fiscal 2025.

The free cash flow was $24.1 million for the third quarter of fiscal 2025 compared with $81.9 million in the second quarter of fiscal 2025.

Estimates for Q4 FY25

The Zacks Consensus Estimate for fourth-quarter fiscal 2025 revenues is pegged at $248.11 million, indicating a year-over-year decline of 0.18%.
 
The consensus mark for earnings is pegged at 21 cents per share, which remained unchanged over the past 30 days. The figure indicates a decline of 8.7% from the year-ago quarter’s reported figure. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)

Zacks Rank & Stocks to Consider

Currently, Mercury carries a Zacks Rank #4 (Sell).

A better-ranked stock from the broader sector is StandardAero SARO, carrying a Zacks Rank #2 (Buy), at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Shares of StandardAero have risen 10.1% year to date. SARO is set to report first-quarter 2025 results on May 12.

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This article originally published on Zacks Investment Research (zacks.com).

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