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Mercury (MRCY) Receives $83M US Naval Air Systems Contract

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Mercury Systems (MRCY - Free Report) recently won a contract worth $83 million from the U.S. Naval Air Systems Command to deliver high-definition, digital Head-Up Display (HUD) systems for the T-45 Goshawk training aircraft.

The U.S. Navy is the first customer to adopt Mercury’s HUD1080 technology. It will enable aviators to see critical flight and weapons data in real-time without taking their eyes off the sky. Under the five-year firm-fixed-price delivery contract, the company aims to deliver around 300 HUD systems, with the first $45 million production order awarded in conjunction with this contract.

Integrated with a camera, the T-45 HUD is based on MRCY’s low-profile HUD design that minimizes pilot discomfort, enhances situational awareness and maximizes an aviator’s field-of-view. Combining Mercury’s HUD with T-45 will solve the obsolescence problem for aircraft and ensure that pilots are trained in an operationally realistic environment.

The company's domain expertise in analog and digital integration helped it build a solid business relationship with defense prime contractors. In June, MRCY unveiled the first safety certifiable, small-form factor and ruggedized mission computer, ROCK 4, with Intel Corporation’s (INTC - Free Report) 11th generation Core i7 processors.

The computer features Mercury’s BuiltSAFE commercial-off-the-shelf (COTS) elements and artifacts, which are tested, certified and fielded more than 30 years on airborne platforms to deliver optimal performance and accelerate safety-critical systems integration. The BuiltSAFE technology reduces recertification needs while maximizing interoperability and speed technology refresh.

In January, the company revealed its next-generation rugged edge servers (RES) with an aim to enhance compute-intensive edge workloads and drive quick insights for the aerospace and defense applications. The latest-gen RES X08 leverages COTS technologies like Intel’s fourth-generation Xeon Scalable processors, NVIDIA’s double-wide H100 graphic processing units, high-speed DDR5 memory, 400 giga-bytes per second network cards and compute express link and latest data storage technologies.

In the same month, MRCY unveiled DRF3182 direct radio frequency processing module, which is the industry’s first signal processing board purpose-built for the aerospace and defense applications. Featuring Intel’s Stratix 10 AX system-on-chip field programmable gate array, the processing board intends to make sure that the modern electronic warfare and radar systems are able to significantly increase processing densities.

In November 2022, the company launched a radiation-tolerant version of its 8GB DDR4 memory component that sets a new bar for performance in data-intensive processing applications in space. In October 2022, Mercury announced that its rapidly reprogrammable electronic attack training system, mPOD, successfully underwent final flight testing and is now available for order.

MRCY’s sustained focus on introducing new and advanced products is helping it win new contracts. Mercury's total bookings at the third quarter end of fiscal 2023 were $245 million, reflecting a book-to-bill ratio of 0.93. MRCY ended the quarter with a backlog of $1.10 billion, up $103.2 million from a year ago. From this backlog, products worth $695 million are expected to be shipped within the next 12 months.

Zacks Rank & Key Picks

Mercury currently carries a Zacks Rank #5 (Strong Sell), while Intel has a Zacks Rank #2 (Buy). Shares of MRCY and INTC have lost 43.4% and 9.8%, respectively, over the past year.

Some better-ranked stocks from the broader Computer and Technology sector are Salesforce (CRM - Free Report) and NVIDIA Corporation (NVDA - Free Report) , each sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today's Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Salesforce’s second-quarter fiscal 2024 earnings has been revised northward by a penny to $1.90 per share over the past 30 days. For fiscal 2024, earnings estimates have moved up by 2 cents to $7.44 in the past 30 days.

CRM's earnings beat the Zacks Consensus Estimate in all the trailing four quarters, the average surprise being 15.5%. Shares of the company have gained 41.1% in the past year.

The Zacks Consensus Estimate for NVIDIA’s second-quarter fiscal 2024 earnings has been revised northward from $1.04 to $2.04 per share over the past 60 days. For fiscal 2024, earnings estimates have moved up by 2 cents to $7.66 in the past 30 days.

NVDA's earnings beat the Zacks Consensus Estimate in two of the trailing four quarters, missing twice, the average surprise being 0.26%. Shares of the company have climbed 185.6% in the past year.


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