Mercury Systems Inc. (MRCY) reported its fourth-quarter financial results after the market close on Tuesday, and the numbers were a mixed bag. Revenue came in at $289.78 million, beating analyst estimates of $266.40 million. But adjusted earnings per share of 37 cents fell just short of the expected 38 cents. That slight miss was enough to send shares down 10.50% in after-hours trading, with the stock at $93.97 at the time of publication.
Investors might be wondering why a company that beat on revenue and posted record numbers is getting punished. Let's dig into the details.
Record Quarter, But Not Perfect
The company reported bookings of $660 million in the fourth quarter, up 33.1% year-over-year. Backlog grew to over $1.9 billion, up 38.4% from the same period last year. The company also generated $42 million in operating cash flow and $29 million in free cash flow during the quarter, ending with $214.31 million in total cash and cash equivalents.
CEO Bill Ballhaus was upbeat about the results. "We delivered fourth quarter fiscal 2026 results that were ahead of our expectations, with record bookings, record backlog, record revenue, the highest EBITDA margin of the year, and robust free cash flow," he said. "Based on our solid execution and strong demand signals, we enter fiscal year 2027 with enhanced visibility and are increasing our outlook for organic growth."
Indeed, the company raised its organic revenue growth target for fiscal 2027 to low double digits. But there's a catch: Mercury expects first-quarter revenue growth to be up high single digits year-over-year, and it noted that this will be the lowest growth of the year. That might be what's spooking investors, who could be looking for a more immediate payoff.
So, is this a case of a good quarter being overshadowed by a slight EPS miss and a cautious near-term outlook? Possibly. But the record bookings and backlog suggest the company is on solid footing for the long haul. As always, the market's reaction in the coming days will tell us more about how investors are interpreting this report.
