Mercury Wins Follow-On Orders, Boosts Presence In DRFM Space

Mercury Systems (NASDAQ:MRCY) recently announced that it has secured follow-on orders worth $16 million over its existing $152 million five-year agreement with the U.S. Navy.

Per the agreement, Mercury will deliver advanced Digital RF Memory (DRFM) jammers to the Navy. With this technological assistance, Mercury will meet the growing requirement for mission critical components for the U.S. military’s electronic warfare (EW) test and training program.

The follow-on orders were received in the current quarter, and is expected to be delivered over the forthcoming quarters.

Expanding EW Portfolio — A Tailwind

Mercury has been focused on the EW segment with new innovations and products. It recently launched the EnsembleSeries DCM6111 6U VPX digital transceiver, which incorporates BuiltSECURE technology, and is based on the OpenVPX standard. It is suitable for advanced EW applications operating in high threat areas.

Notably, Mercury is involved in two major programs related to SEWIP (Surface Electronic Warfare Improvement Program) — SEWIP Block 2 and SEWIP Block 3. Management stated that Block 2 is well-funded program, and is expected to be one of the largest revenue drivers.

Moreover, management expects the recent completion of Syntonic Microwave and The Athena Group buyouts to expand Symantec’s capabilities in EW and embedded security.

DRFM Market’s Prospects Bright

Technological developments in the electronic combat equipment, increasing use of DRFM jammers in the navy and military aircraft, and need to improve existing platforms are driving the DRFM market.

Per a MarketsandMarkets research report, the DRFM market is projected to reach $1.22 billion by 2022, witnessing a CAGR of 12.16% from 2016 to 2022.

However, major players operating in the space such as Airbus Group (OTC:EADSY) , Northrop Grumman Corporation (NYSE:NOC) , and Raytheon Company (NYSE:RTN) , pose significant threat to Mercury.

Nonetheless, with its continued efforts and innovations, Mercury is positioned well to benefit from the promising prospects of this area of the defense systems market.

Currently, the company carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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