Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Mercury Computer Systems (Nasdaq: MRCY) dropped 15% in intraday trading today after issuing disappointing guidance for the current quarter.

So what: The company reported third fiscal quarter EPS of $0.20, a nice beat of the consensus estimate of $0.15. But management expects EPS of $0.11 to $0.13 in the current quarter, well below the consensus estimate of $0.18.

Now what: Order delays related to federal budget timing and higher operating expenses are behind the disappointing outlook. In addition, the issuance of 5.6 million new shares in February raised the share count and is therefore a drag on EPS. The P/E ratio of 21.5 times seems rich, given the risks that federal budget delays become permanent cuts and higher operating expenses become the norm. Investors may decide that MRCY deserves no MERCY. 

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