Why Mercury Systems Inc. Stock Dropped Today

What happened

Shares of Mercury Systems Inc. (NASDAQ: MRCY) were down 10.2% as of 2:20 p.m. EDT Wednesday after the defense electronics contractor announced weaker-than-expected fiscal third-quarter 2018 results.

More specifically, Mercury Systems' revenue grew 8.4% year over year to $116.3 million, including roughly $15.7 million from its acquisitions of Delta Microwave, Richland Technologies, and Themis Computer. On the bottom line, that translated to adjusted net income of $14.2 million, or $0.30 per share, up from $13.2 million, or $0.29 per share in the same year-ago period.

By comparison, most investors were looking for higher adjusted earnings of $0.35 per share on revenue of $124 million.

Stock market prices and charts in red and green on an LED display.

Image source: Getty Images.

So what

Mercury CEO Mark Aslett explained that the company's results were negatively affected by the prolonged continuing resolution , though he also noted that its outlook "remains strong" in spite of these delays.

To be sure, budget-related order delays shifted roughly $11 million of revenue from fiscal Q3 into fiscal Q4, according to Aslett, and Mercury Systems has already recognized the majority of that revenue. Bookings also climbed 41% to $150 million, and Mercury Systems ended the quarter with a backlog of $429 million -- both new company records.

Now what

As such, Mercury Systems reaffirmed its previous guidance for full fiscal-year revenue of $464 million to $468 million, excluding the recent close of the purchase of Themis Computer. Including sales from that acquisition, Mercury Systems now expects full fiscal year 2018 revenue of $487 million to $492 million, which should translate to adjusted earnings per share of $1.35 to $1.38. By comparison, consensus estimates predicted lower full fiscal-year sales of $480.5 million, but higher adjusted earnings of $1.39 per share.

In the end, it's no surprise to see shares of Mercury Systems falling in response to its quarterly shortfall relative to expectations. But considering that was largely an issue of timing, I don't think patient, long-term investors have any reason to worry.

10 stocks we like better than Mercury Computer Systems
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor , has quadrupled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Mercury Computer Systems wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of April 2, 2018

Steve Symington has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Personal Finance , Stocks
Referenced Symbols: MRCY

More from Motley Fool


Motley Fool

Motley Fool

Market News, Investing

Research Brokers before you trade

Want to trade FX?