Shares of Mercury Systems (NASDAQ: MRCY) rallied on Tuesday, breaking out after the aerospace and defense technology provider reported robust fourth-quarter results and received an analyst upgrade alongside multiple price-target hikes.
The company, which supplies subsystems, computing processing, and analytics platforms for aerospace and defense firms, posted adjusted earnings of $0.47 per share — more than double the prior year and significantly ahead of FactSet’s consensus estimate of $0.22.
Revenue climbed nearly 10% to $273.1 million, surpassing expectations of $244 million.
The company’s stock surged 23.34% to $66.09 at the time of writing, after hitting an intraday high of $67.25, which was also the 52 week high for the stock.
The stock has gained 56% in the year so far.
Record bookings and backlog growth
Mercury Systems reported total bookings of $341.5 million in the quarter, marking a record for the period.
The company’s backlog also reached a new high of $1.4 billion, up 6% year-over-year.
Sequentially, bookings rose 70%, while year-over-year growth was 20%, according to Truist Securities’ analysis.
The strong performance was partly supported by a $30 million revenue pull-forward, which contributed to the quarterly beat.
Excluding this effect, Truist projects high single-digit revenue growth for fiscal 2026, supported by operational improvements and a book-to-bill ratio likely exceeding 1.0.
Mercury’s management described its fiscal 2026 outlook as conservative, noting that it does not factor in additional revenue pull-forward and includes a focus on reducing unbilled receivables.
The company expects revenue for 2026 to grow in the low single digits overall, with relatively flat sales in the first half and sequential growth in the second half.
Adjusted EBITDA margins are projected to be in the mid-teens for the year, starting in the low double digits in the first half and expanding through year-end, with Q4 margins expected to be the highest.
Analysts raise ratings and targets
The earnings beat and record backlog prompted multiple analyst actions.
Raymond James upgraded Mercury stock to “strong buy” from “outperform,” citing potential for EBITDA margin growth of 70% over the next two years and strong revenue visibility from its backlog.
The firm raised its price target to $80 from $55.
JPMorgan increased its target to $68 from $56, maintaining a “neutral” rating, and commented that the 2026 outlook appears achievable with potential upside.
Baird lifted its target to $70 from $58 while keeping an “outperform” rating.
Truist Securities also raised its target, moving to $71 from $60 and maintaining a “buy” rating.
The firm highlighted the company’s strong liquidity position, with a current ratio of 3.44, and moderate debt levels.
Strong finish to fiscal 2025
Mercury’s fiscal 2025 performance underscores its ability to exceed market expectations and build a record order pipeline.
The company has expressed optimism in achieving above-market top-line growth over the long term, aiming for adjusted EBITDA margins in the low-to-mid 20% range and free cash flow conversion of 50%.
With industry demand trends favorable and its backlog at record levels, analysts and investors will be closely watching the company’s execution in fiscal 2026 to determine whether its cautious outlook leaves room for additional upside.
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