Mercury Systems surges 6% on record backlog, earnings beat
Defense tech supplier posts $1.5B in orders as EPS triples analyst estimates
Mercury Systems shares jumped 5.7% on Tuesday after the aerospace and defense technology supplier reported adjusted earnings that tripled analyst estimates and a record backlog of orders, signaling strengthening demand for its mission-critical components.
The Andover, Massachusetts-based company posted adjusted earnings per share of 16 cents for the second quarter of fiscal 2026, beating the 6.4-cent consensus estimate by 148%. Revenue reached $233 million, surpassing expectations of $211 million, according to the company's earnings release.
Perhaps most striking for investors was the company's record backlog of $1.5 billion, up 8.8% from a year earlier. A book-to-bill ratio of 1.23 indicates that for every $1 of revenue recognized, the company booked $1.23 in new orders, a key metric of future revenue visibility in the defense contracting industry.
"Record first-half bookings of $549 million and a book-to-bill of 1.27 demonstrate strong demand across our mission-critical franchise," the company stated in its earnings report.
The stock closed at $99.28, extending its year-to-date gains and pushing the market capitalization above $5.6 billion. Shares have now rallied 149% from their 52-week low of $39.89 reached last year, though they remain modestly below the 52-week high of $103.84.
Mercury Systems specializes in designing advanced components, modules, and subsystems for defense platforms, with a focus on high-integrity processing and secure cloud solutions. The company's products are embedded in critical defense applications ranging from radar and electronic warfare systems to communications and intelligence platforms.
Adjusted EBITDA climbed 36.3% year-over-year to $30 million, while free cash flow reached $46 million. The company reaffirmed its full-year fiscal 2026 guidance, suggesting management remains confident in sustaining the momentum despite broader economic uncertainty.
Analysts have turned increasingly bullish on the stock, with a consensus target price of $90.88 among the nine analysts covering the company. Six analysts rate the shares a buy or strong buy, two recommend hold, and one maintains a sell rating, according to market data.
The strong results come as global defense spending continues to rise, driven by geopolitical tensions and military modernization programs. Mercury Systems' focus on electronic warfare, radar systems, and secure communications positions it to benefit from increased defense budgets in the United States and allied nations.
Bookings of $288 million in the quarter grew 18.6% year-over-year, demonstrating accelerating demand even as some defense contractors face budget pressures in other segments. The company's ability to maintain pricing power and expand margins in its specialty niche has attracted institutional investors, with institutional ownership exceeding 110% of float due to significant short interest.
The company's fiscal year ends in June, giving investors two more quarters to assess whether the record backlog translates into sustained earnings growth. Analystysts will be watching for any updates on major contract awards and progress on the company's strategic initiatives to expand its footprint in secure processing and cloud-based defense solutions.
Mercury Systems reports third-quarter results in May, with management likely to face questions about pipeline visibility, potential contract delays, and the impact of any changes in defense spending priorities under the new administration.