Buy Mercury Systems Stock. It’s Poised for a Turnaround.

Mercury Systems specializes in electronics and chips for the aerospace and defense industries of the U.S. and its allies.

Courtesy of Mercury Systems

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Everyone goes through growing pains, and defense contractor

Mercury Systems

is suffering from them in a big way. Now a new CEO has the chance to help the struggling company mature into what management—and investors—always envisioned.

Based in Andover, Mass., Mercury (ticker: MRCY) specializes in electronics and chips for the aerospace and defense industries of the U.S. and its allies. Mercury says it has more than 300 programs with some 25 defense contractors, and its products are found in F-16, F-18, and F-35 fighter jets; Predator and Reaper unmanned aerial vehicles; and

RTX
’s
(RTX) Patriot surface-to-air missiles, to name just a few.

Where it once specialized in simpler circuits, switches, and sensors, Mercury Systems has been moving up the value chain from components to entire subsystems—a transition that requires spending billions on mergers and acquisitions and research and development. The company has made 14 acquisitions since 2016, including firms that make aircraft display systems, radio-frequency components, ruggedized computers and servers, and flight control units.

Mercury’s plan on paper has been to combine disparate components into larger subsystems to sell to its defense-contractor clients—boosting sales and profit margins.

“It’s a good strategy because when you’re a subsystem provider,…

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