Mercury Systems MRCY is scheduled to report second-quarter fiscal 2023 results after market close on Jan 31.
The company’s earnings surpassed estimates twice in the trailing four quarters while missing the same on two occasions, the average beat being -0.7%.
For the fiscal second quarter, Mercury Systems projects revenues in the range of $225-$240 million ($232.5 million at the midpoint). The Zacks Consensus Estimate for revenues is pegged at $233.3 million, suggesting a year-over-year increase of 5.8%.
The company anticipates non-GAAP earnings in the range of 31-36 cents per share. The Zacks Consensus Estimate stands at 33 cents per share, indicating a year-over-year decrease of approximately 15.4%.
Let’s see how things have shaped up before the upcoming announcement.
Mercury Systems Inc Price and EPS Surprise
Mercury Systems Inc price-eps-surprise | Mercury Systems Inc Quote
Factors to Consider
Mercury Systems' performance is likely to have benefited from its large pipeline of defense projects in the to-be-reported quarter. The company’s domain expertise in analog and digital integration helped it build a solid business relationship with defense prime contractors, thereby helping it win new contracts.
In the first quarter of fiscal 2023, Mercury Systems’ total bookings were $266.9 million, resulting in a 1.17 book-to-bill ratio. The company ended the quarter with a backlog of $1.08 billion, up $193.1 million on a year-over-year basis. Within the next 12 months, products worth $694.6 million from this order backlog are expected to be shipped.
Mercury Systems’ second-quarter performance is also likely to have benefited from modernization in radar, electronic warfare and C4I. This is providing the company with new opportunities in weapon systems, space, avionics processing, and mission computing and embedded rugged services.
Moreover, robust revenue contributions from the newly acquired businesses are expected to have aided the company’s top line in the to-be-reported quarter. Mercury Systems’ acquired businesses (5% of the total revenues) — Avalex Technologies and Atlanta Micro — cumulatively contributed $11.8 million to first-quarter fiscal 2023 revenues.
However, macroeconomic challenges-related modernization delays and customer execution issues are likely to have impacted the company’s revenues in the second quarter. Though Mercury Systems has been steadily winning federal contracts, these low-margin deals are likely to have affected its profitability in the to-be-reported quarter.
What Our Model Says
Our proven model does not conclusively predict an earnings beat for Mercury Systems this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. However, that’s not the case here.
Though MRCY carries a Zacks Rank #3 at present, it has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Stocks With the Favorable Combination
Per our model, MSCI MSCI, Meta Platforms META and Lam Research LRCX have the right combination of elements to post an earnings beat in their upcoming releases.
MSCI carries a Zacks Rank #2 and has an Earnings ESP of +0.43%. The company is scheduled to report fourth-quarter 2022 results on Jan 31. Its earnings beat the Zacks Consensus Estimate thrice in the preceding four quarters while missing the same once, the average surprise being 3.7%. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for MSCI’s fourth-quarter earnings stands at $2.71 per share, implying a year-over-year increase of 8%. It is estimated to report revenues of $565.2 million, which suggests growth of 2.8% from the year-ago quarter.
Meta is slated to report fourth-quarter 2022 results on Feb 1. The company has a Zacks Rank #3 and an Earnings ESP of +6.88% at present. META’s earnings beat the Zacks Consensus Estimate once in the trailing four quarters while missing the same on three occasions, the average surprise being -2.6%.
The Zacks Consensus Estimate for fourth-quarter earnings is pegged at $2.12 per share, suggesting a decline of 42.2% from the year-ago quarter’s earnings of $3.67. Meta’s quarterly revenues are estimated to decline 7% year over year to $31.3 billion.
Lam Research carries a Zacks Rank #3 and has an Earnings ESP of +0.14%. The company is slated to report second-quarter fiscal 2023 results on Jan 25. Its earnings surpassed the Zacks Consensus Estimate thrice in the trailing four quarters while missing the same on one occasion, the average surprise being 7.4%.
The Zacks Consensus Estimate for LRCX’s fiscal second-quarter earnings is pegged at $9.96 per share, indicating a year-over-year increase of 16.8%. The consensus mark for revenues stands at $5.1 billion, suggesting a year-over-year increase of 20.2%.
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