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On Wednesday, Baird analysts upgraded Mercury Systems (NASDAQ:MRCY) stock from Neutral to Outperform, significantly raising the price target from $37.00 to $58.00. The upgrade reflects Baird’s increased confidence in the company’s turnaround and improved business performance. Currently trading at $42.09, Mercury Systems has shown strong momentum with a 28% gain over the past six months. According to InvestingPro analysis, the stock appears to be trading above its Fair Value.
Mercury Systems, known for its aerospace and defense technology solutions, has recently reported 2Q25 results that surpassed expectations. The company also showcased a record in free cash flow (FCF) as Unbilled Receivables continued to decline. These factors have contributed to Baird’s belief that Mercury Systems is on a solid path to realign with its target business model by the end of FY25. InvestingPro data shows the company maintains a healthy current ratio of 4.1, with liquid assets well exceeding short-term obligations.
The analysts highlighted that although FY25 is still seen as a transitional period for Mercury Systems, there are clear positive changes underway. Bookings, organic growth, margins, and FCF generation are all showing signs of improvement, marking a pivotal point in the company’s long-term recovery.
Baird’s decision to upgrade the stock rating and price target is based on the company’s recent performance and the resolution of technical risks associated with challenged programs. The analysts’ comment underscores the firm’s expectation that Mercury Systems has overcome its previous hurdles and is now moving in a positive direction.
Mercury Systems’ stock is likely to be influenced by this new rating and price target, as investors and the market respond to Baird’s updated outlook. The company’s progress towards its FY25 targets and the ongoing improvements in its financial metrics will be key factors to watch in the upcoming months. While currently unprofitable, InvestingPro analysis indicates net income is expected to grow this year, with analysts forecasting a return to profitability. Discover more insights and 8 additional ProTips about Mercury Systems in the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.
In other recent news, Mercury Systems reported its second quarter fiscal 2025 results, revealing a substantial revenue beat that exceeded analyst expectations. The company posted a revenue of $223.1 million, surpassing the consensus estimate of $185.35 million and marking a 13% increase year-over-year. Despite a GAAP net loss of $17.6 million, or -$0.30 per share, investors focused on the strong revenue growth and improved cash flow. The company generated a record operating cash flow of $85.5 million and free cash flow of $81.9 million in the quarter.
Mercury Systems reported bookings of $242.4 million for the quarter, resulting in a book-to-bill ratio of 1.09. The company’s backlog reached a record $1.4 billion, up 6% year-over-year. Adjusted EBITDA for the quarter was $22.0 million, with an adjusted EBITDA margin of 9.9%, both showing substantial improvement from the previous year. These recent developments reflect the company’s continued progress in its four priority areas, as noted by Mercury’s Chairman and CEO, Bill Ballhaus.
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