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On Wednesday, RBC Capital Markets adjusted its outlook on Mercury Systems, a defense technology company listed on (NASDAQ:MRCY). The firm raised the price target from $48.00 to $50.00, maintaining a Sector Perform rating on the stock. The adjustment comes as Mercury’s stock has shown remarkable strength, delivering a 73% return over the past year. According to InvestingPro analysis, the stock appears to be trading above its Fair Value, with current price near $48.22. RBC Capital’s decision follows Mercury Systems’ latest fiscal third-quarter earnings report.
Mercury Systems reported adjusted earnings per share (EPS) of $0.06 for the third quarter of fiscal year 2025, falling short of the consensus estimate of $0.09. Despite this, the company saw a year-over-year revenue increase of 1.5%, totaling $211.4 million, which surpassed consensus forecasts by 4%. The adjusted EBITDA for the quarter was $24.7 million, representing an 11.7% margin and outperforming expectations by 6%. InvestingPro data reveals the company maintains a healthy current ratio of 3.62, indicating strong short-term liquidity, and operates with a moderate debt-to-equity ratio of 0.45.
The company also reported strong free cash flow (FCF) for the quarter, amounting to $24.1 million. This performance was notably better than the consensus, which had anticipated a use of cash. InvestingPro analysis shows positive momentum in the company’s financial health, with 8 additional ProTips available to subscribers, including insights on expected profitability and growth prospects. According to the analyst’s comments, Mercury Systems is on a solid path to meet its financial framework for the fiscal year 2025. The company has shown progress in enhancing the quality of its backlog and releasing working capital.
RBC Capital’s analyst highlighted Mercury Systems’ steady progress and growing confidence in the company’s fiscal year 2026 outlook. The analyst’s positive remarks reflect Mercury Systems’ ability to maintain financial stability and potentially grow in the defense sector, despite the earnings miss for the quarter. With an Altman Z-Score of 3.38 indicating financial stability and analysts forecasting net income growth, the revised price target suggests a modest optimism for the stock’s performance going forward.
In other recent news, Mercury Systems Inc. reported its third-quarter earnings for 2025, revealing an earnings per share (EPS) of -$0.33, which significantly missed the forecasted $0.10. However, the company exceeded revenue expectations by reporting $211 million, surpassing the anticipated $205.88 million, reflecting a 1.5% year-over-year increase. Despite the revenue beat, the market reaction was cautious, likely due to the notable EPS miss. Strategic acquisitions and innovations in cybersecurity and processing technologies were highlighted as part of the company’s recent developments. Mercury Systems also announced the acquisition of Starlab from Wind River, enhancing its cybersecurity offerings. The company continues to focus on operational efficiency, with a reported adjusted EBITDA of $24.7 million, a substantial improvement from the previous year’s -$2.4 million. Analyst firms, while not explicitly mentioned, have not issued any recent upgrades or downgrades following these results. Mercury Systems anticipates further improvements in EBITDA margins for the fourth quarter, targeting mid-teens, as part of its ongoing efforts to enhance financial performance.
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