Mercury Systems Up 27%: Financials Send Investors a Clear Signal

Core Insights - Mercury Systems reported strong fourth-quarter and full-year fiscal 2025 results, with adjusted earnings per share (EPS) of 47 cents, significantly exceeding the analyst consensus of 21 cents, indicating a major operational shift within the company [1][2][3] Financial Performance - The company achieved a full-year adjusted EBITDA of $119.4 million, a substantial increase from $9.4 million in fiscal 2024, demonstrating effective management focus on efficiency and cost control [7][8] - Mercury generated a record $119.0 million in free cash flow for the year, a significant improvement from $26.1 million in fiscal 2024, enhancing its financial position [8][9] Demand and Backlog - Mercury reported a book-to-bill ratio of 1.25 for the quarter, indicating that demand is growing faster than current sales, which is crucial for future revenue [4] - The company established a record backlog of $1.40 billion, up 6% from the prior year, with $807.8 million expected to convert into revenue within the next 12 months, providing a stable foundation for growth [5] Market Response and Analyst Ratings - Following the earnings release, several investment firms raised their price targets for Mercury's stock, with Raymond James upgrading it to Strong Buy and setting a target of $80 per share [10][11] - The market's positive response reflects a consensus view among analysts that the company's operational improvements are sustainable [11][12] Future Outlook - Mercury's management provided initial guidance for low-single-digit revenue growth in fiscal 2026, reflecting strategic planning and a focus on clearing older, lower-margin contracts to improve backlog health [12][13] - The company is positioned to capture rising demand in the defense sector, supported by a revitalized balance sheet and clear strategy for future growth [14][15]