Why Investors Were Fired Up About Mercury Systems Stock This Week

Mercury Systems (NASDAQ: MRCY) stock appeared set to lock in a double-digit gain in share price this week. According to data compiled by S&P Global Market Intelligence , as of the wee hours Friday morning the defense communications company's shares were up by nearly 13% week to date. A strong earnings report was the key factor in that rise.

Analyst estimates were obliterated

Mercury published its fourth quarter of fiscal 2024 figures after market hours Tuesday, and the reaction from both investors and analysts was strongly positive.

This was despite the fact that revenue was actually down on a year-over-year basis for the period. It came in at $248.6 million, against the fourth quarter of fiscal 2023 tally of over $253 million.

The situation was notably different for Mercury on the bottom line, where it managed to more than double its net income. Non- GAAP (adjusted) profitability grew steeply to more than $13 million ($0.23 per share) from the year-ago income of almost $6.2 million.

With those numbers, Mercury blew past analyst estimates for the quarter. Those pundits were collectively modeling an adjusted loss of $0.06 per share on revenue barely above $231 million.

A clutch of price target raises

The analyst reaction to Mercury's earnings release was very swift and quite bullish, generally speaking.

Four analysts raised their price targets on the stock Wednesday morning, although not all counseled buying the stock. Among these was RBC Capital's Ken Herbert, who lifted his fair value assessment to $35 per share from $30, yet maintained his sector perform (hold) recommendation.

In a new research note, Herbert wrote that while the company showed notable improvements in its operations, it's guiding for flat revenue in fiscal 2025.

Before you buy stock in Mercury Systems, consider this: