Results: Mercury Systems, Inc. Beat Earnings Expectations And Analysts Now Have New Forecasts

Mercury Systems, Inc. (NASDAQ:MRCY) just released its quarterly report and things are looking bullish. It was overall a positive result, with revenues beating expectations by 2.6% to hit US$206m. Mercury Systems also reported a statutory profit of US$0.29, which was an impressive 23% above what the analysts had forecast. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.

View our latest analysis for Mercury Systems

Taking into account the latest results, the current consensus from Mercury Systems' nine analysts is for revenues of US$881.1m in 2021, which would reflect a meaningful 11% increase on its sales over the past 12 months. Statutory earnings per share are forecast to sink 17% to US$1.31 in the same period. In the lead-up to this report, the analysts had been modelling revenues of US$880.6m and earnings per share (EPS) of US$1.34 in 2021. The consensus analysts don't seem to have seen anything in these results that would have changed their view on the business, given there's been no major change to their estimates.

The analysts reconfirmed their price target of US$92.22, showing that the business is executing well and in line with expectations. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. Currently, the most bullish analyst values Mercury Systems at US$106 per share, while the most bearish prices it at US$81.00. Still, with such a tight range of estimates, it suggeststhe analysts have a pretty good idea of what they think the company is worth.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. It's pretty clear that there is an expectation that Mercury Systems' revenue growth will slow down substantially, with revenues next year expected to grow 11%, compared to a historical growth rate of 25% over the past five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 5.6% next year. So it's pretty clear that, while Mercury Systems' revenue growth is expected to slow, it's still expected to grow faster than the industry itself.

The Bottom Line

The most obvious conclusion is that there's been no major change in the business' prospects in recent times, with the analysts holding their earnings forecasts steady, in line with previous estimates. Happily, there were no major changes to revenue forecasts, with the business still expected to grow faster than the wider industry. The consensus price target held steady at US$92.22, with the latest estimates not enough to have an impact on their price targets.

With that in mind, we wouldn't be too quick to come to a conclusion on Mercury Systems. Long-term earnings power is much more important than next year's profits. We have forecasts for Mercury Systems going out to 2023, and you can see them free on our platform here.

You should always think about risks though. Case in point, we've spotted 1 warning sign for Mercury Systems you should be aware of.

This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.