Mercury Systems (NASDAQ:MRCY) shares plunged more than 15% premarket Wednesday after the company's latest quarterly results missed consensus expectations, while guidance
MRCY posted a second-quarter loss per share of ($0.42), $0.49 worse than the analyst estimate of $0.07. Revenue for the quarter came in at $197.5 million versus the consensus estimate of $212.83 million.
The company also reported total bookings for the second quarter of $325.4 million, yielding a book-to-bill ratio of 1.65.
Chief executive Bill Ballhaus said the second quarter of the "transitional year" saw the company focus on the two dynamics in the business they believe are transitory.
"Shifting our high mix of development programs to production and converting our high level of working capital into significant cash flow," he stated.
Ballhaus noted that the company's financial performance was diminished by several factors, including what they believe is outsized program cost growth, as well as manufacturing adjustments and contract settlements.
For the full fiscal year 2024, MRCY reduced its revenue guidance to between $800 million and $850 million based on its first-half revenue performance and "reduced volumes expected in the second half."
"We expect lower volumes in the second half as we continue to apply our operational capacity to advance challenged and late-stage development programs as well as reduce working capital, especially related to unbilled receivables," the company said.
MRCY continues to expect bookings to exceed $1 billion for the full fiscal year.
Reacting to the report, analysts at William Blair said new challenges in the company's troubled program have led to a quarterly miss and significant revenue guidance reduction.
"Once again, Mercury's results came in significantly below our and consensus expectations as the company was impacted by a troubled program that caused it to incur higher-than-expected program costs," wrote the analysts, who have an Outperform rating on the stock. "This led the company to significantly miss both revenue and pro forma EPS expectations and materially reduce full-year revenue guidance."
They added that challenges are clearly persisting with Mercury as investors have become impatient with the difficulties in resolving the troubled program.
At Truist, analysts downgraded MRCY to Hold from Buy, lowering the price target to $28 from $48 per share.
"Results were weak and the FY24 updated guidance was worse as revs at the midpoint were cut by 15%," said the analysts. "Risk on challenged [programs] is being retired, but technological obstacles have resulted in lower volumes and negative EACs. Moreover, we believe technical risks will persist into FY25 and accordingly we are reducing our ests."