Mercury Systems falls 10.5% after Q4 earnings despite record revenue

Mercury Systems reported record Q4 revenue of $289.8 million, beating consensus, but adjusted EPS of 37 cents missed estimates.

"Based on our solid execution and strong demand signals, we enter fiscal year 2027 with enhanced visibility and are increasing our outlook for organic growth," Bill Ballhaus, chairman and CEO of Mercury Systems, said.

The Andover, Massachusetts-based defense electronics maker posted revenue up 6.1 percent from $273.1 million a year earlier, versus the $266.4 million consensus. Adjusted EPS of 37 cents compared with 47 cents in the year-ago quarter and the 38-cent estimate.

Metric	Actual	Consensus	Beat/Miss
Revenue	$289.8M	$266.4M	+$23.4M
Adjusted EPS	$0.37	$0.38	-$0.01

Shares fell 10.5 percent in after-hours trading to $93.97. The decline came even as Mercury raised its fiscal 2027 organic growth target to low double digits, citing record bookings and backlog.

Bookings reached a record $660 million in the quarter, up 93.1 percent year over year and nearly double the prior record, yielding a book-to-bill ratio of 2.28. Backlog climbed above $1.9 billion, up 38.4 percent, with about $1.0 billion expected to convert to revenue within 12 months. Ballhaus said the quarter delivered record bookings, backlog and revenue, with the highest EBITDA margin of the year and strong free cash flow.

Mercury, a Nasdaq-listed supplier of mission-critical processing for aerospace and defense, generated $42 million in operating cash flow and $29 million in free cash flow during the quarter, ending the period with $214.31 million in cash. Adjusted EBITDA was $49 million, a 16.7 percent margin, down from $51 million a year earlier.

For fiscal 2026, revenue rose to $984 million from $912 million, with bookings of $1.5 billion and a book-to-bill ratio of 1.57. Adjusted EPS reached $1.06, reversing an adjusted loss of 64 cents in fiscal 2025, while adjusted EBITDA climbed to $150 million from $119 million. Annual free cash flow fell to $68 million from $119 million.

Mercury expects first-quarter fiscal 2027 revenue growth of high single digits year over year, which it said would be the lowest of the year. The company said growth should accelerate through the year as the record backlog converts to revenue.

The raised outlook shows management expects defense demand to accelerate across Mercury's portfolio. Investors will watch the first-quarter results for margin recovery after adjusted EPS fell short of estimates.

This article is for informational purposes only and does not constitute investment advice.