What Happened?

Shares of aerospace and defense company Mercury Systems (NASDAQ:MRCY) jumped 17.4% in the morning session after the company reported impressive third-quarter earnings that significantly blew past analysts' sales expectations. Notably, bookings grew 29% year-over-year and the company recorded a book-to-bill ratio of 1.21. This indicates that the company is receiving more orders than it is fulfilling, which sets the stage for the improved momentum to extend into the next quarter. To provide more visibility into the growth outlook, the company reported a backlog of $1.3 billion, up 16% year on year. Mercury expects to convert $777 million of the backlog into revenue within the next 12 months. These top-line improvements also helped the company beat analysts' EBITDA and EPS estimates. Overall, this was a stronger quarter for the company.

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What The Market Is Telling Us

Mercury Systems’s shares are not very volatile and have only had 9 moves greater than 5% over the last year. Moves this big are rare for Mercury Systems and indicate this news significantly impacted the market’s perception of the business. 

The biggest move we wrote about over the last year was 3 months ago when the stock gained 21.9% on the news that the company reported second-quarter earnings results. Mercury Systems blew past analysts' revenue, EPS, and free cash flow expectations. Its backlog, an indicator of future sales, also outperformed Wall Street's estimates. Zooming out, we think this quarter featured some important positives.

Mercury Systems is up 10.7% since the beginning of the year, and at $39.93 per share, it is trading close to its 52-week high of $40.12 from August 2024. Investors who bought $1,000 worth of Mercury Systems’s shares 5 years ago would now be looking at an investment worth $566.50.

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