Mercury Systems MRCY has launched the first space-qualified Field Programmable Gate Array (FPGA) processing board — SCFE6933. This FPGA is radiation-tolerant and conforms to the 6U SpaceVPX standard. The above specifications will result in enhanced speed, efficient and reliable data processing in orbit.
The single SCFE6933 is said to achieve the same result that previously necessitated three boards. It integrates Xilinx Versal AI core powered by Advanced Micro Devices and is optimized for size, weight and power.
This program was carried out in partnership with Ball Corporation’s BALL subsidiary, Ball Aerospace & Technologies Corporation, which is also the first client for the SCFE6933. Ball Aerospace & Technologies Corporation is a leading player in the aerospace industry and had previously selected Mercury Systems for a methane monitoring satellite project in June 2022.
However, it should be noted that Ball Corporation reached an agreement in August 2023 to sell the aerospace business unit to BAE Systems for $5.6 billion in cash. The transaction is expected to complete in the first half of 2024.
Mercury Systems Inc Price and Consensus
Mercury Systems Inc price-consensus-chart | Mercury Systems Inc Quote
MRCY has introduced this product at the perfect time when there’s an increasing need for advanced data processing in orbital operations. The FPGA processing board will have a multifaceted role, such as reducing latency and facilitating the preprocessing of sensor data. This will empower space programs to respond swiftly to emerging threats and make timely decisions based on mission-critical information while keeping satellites’ costs low.
The SCFE6933 FPGA processing board can be a crucial lifeline for Mercury in these challenging times. Despite the company's reputation as a reliable partner for the aerospace and defense sector due to its strategic position at the convergence of high-tech and defense, it is currently grappling with various program-related difficulties.
MRCY has a group of programs that underperformed, causing a significant drop in its financial performance during the fourth quarter of fiscal 2023. This decline can be attributed to around 20 programs that faced substantial and unusual cost increases, mainly due to development difficulties.
Dull Outlook Amid Setbacks in Program
Mercury’s financials took a hit of around $29 million in the fourth quarter and $56 million for the entire fiscal year due to the underperforming programs. Furthermore, elevated labor and material costs had a detrimental impact on both revenues and margins, given that nearly 90% of its program portfolio comprises the firm’s fixed-price contracts.
Over the past few years, the company has also operated with the risk of customer concentration. Approximately 38% of its fiscal 2023 revenues were generated from three customers namely, Lockheed Martin Corporation LMT, Raytheon Technologies RTX and Northrop Grumman.
Lockheed Martin and Mercury had entered into an agreement to develop innovative sensor processing systems in Switzerland. In another collaboration, Raytheon and MRCY worked together to supply the processing hardware for the initial deployment of the U.S. Army's Lower Tier Air and Missile Defense Sensor.
The defense prime contractors accounted for a substantial portion of Mercury's revenues in fiscal year 2023. This means that if any of these customers terminate the relationship with Mercury, the company could face a substantial drop in revenues.
For fiscal 2024, MRCY expects revenues in the band of $950 million to $1 billion, indicating flat year-over-year growth at the mid-point. The Zacks Consensus Estimate for revenues is pegged at $218.2 million, indicating a 4.1% year-over-year decline.
Ball Corporation, Lockheed Martin and Raytheon Technologies carry a Zacks Rank #3 (Hold) each, while Mercury Systems carries a Zacks Rank #4 (Sell) at present. Shares of MRCY, BALL, RTX and LMT have lost 14.3%, 1.1%, 24.2% and 10.8% year to date, respectively. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
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