It has been about a month since the last earnings report for Mercury Systems (MRCY Quick QuoteMRCY - Free Report) . Shares have added about 1% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Mercury Systems due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Mercury Surpasses Q1 Earnings & Revenue Estimates

Mercury Systems reported first-quarter fiscal 2021 non-GAAP earnings of 51 cents per share, beating the Zacks Consensus Estimate by 8.5%. The figure jumped 13.3% year over year.

Revenues of $205.6 million also surpassed the consensus mark by 3.1% and grew 16% year over year on robust organic growth.

Quarterly Details

Organic revenues (96% of total revenues) grew 12% to $196.8 million in the reported quarter.

Moreover, acquired revenues (4% of total revenues) of $8.8 million soared from the $0.9 million reported in the year-ago quarter, primarily attributable to the acquisition of American Panel Corporation.

Mercury's total bookings at the end of the fiscal first quarter came in at $200.7 million, reflecting a 0.98 book-to-bill ratio. The company ended the quarter with a backlog of $826.1 million, up $114.3 million year over year. Within the next 12 months, $516.1 million worth of products from this backlog of orders are expected to be shipped.

Operating Details

Gross margin in the fiscal first quarter shrunk 130 basis points (bps) year over year to 42.9%.

Adjusted EBITDA grew 16.6% year over year to $42.8 million. Also, adjusted EBITDA margin expanded 10 bps year on year to 20.8%.

Selling, general & administrative expenses as a percentage of revenues shrunk 90 bps year over year to 16%.

However, research & development expenses as a percentage of revenues expanded 100 bps to 13.3%.

Operating margin contracted 80 bps year on year to 9.1%.

Balance Sheet and Cash Flow

Mercury had cash and cash equivalents of $239.1 million as of Oct 2, 2020, up from the $226.8 million witnessed at the end of the previous quarter.

The company generated $22.9 million of cash flow from operating activities. Free cash flow was $12 million.

Guidance

For the second quarter of fiscal 2021, revenues are projected at $200-$210 million.

Adjusted EBITDA is anticipated in the band of $42-$44 million. Adjusted earnings are estimated to be 48-51 cents per share.

Mercury raised the lower end of its full-year revenue guidance to $865-$885 million from $860-$885 million.

The Adjusted EBITDA forecast has also been raised to $190-$196 million from the $188-$196 million projected earlier. Adjusted earnings are now estimated to be $2.20-$2.28 per share, up from the previous expectation of $2.15-$2.26 per share.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision. The consensus estimate has shifted -11.93% due to these changes.

VGM Scores

Currently, Mercury Systems has a nice Growth Score of B, a grade with the same score on the momentum front. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Mercury Systems has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.