NEW YORK -- Shares of Mercury Computer Systems Inc. sank 17 percent before the opening bell Friday as analysts cut their expectations for future profits after the defense contractor cut its outlook for its most recent quarter.
Mercury Computer blamed uncertainty about the U.S. defense budget for its weak results, and is cutting jobs and taking other measures to shave costs in light of worries about defense spending.
The defense industry is struggling against automatic across-the-board spending cuts that are slated to go into effect in January unless politicians are able to work out a budget.
"The uncertainties surrounding the U.S. defense budget and resulting slowdown in defense program funding and contracting ultimately affected our first quarter business more significantly than we initially anticipated," said Mercury Computer CEO Mark Aslett.
The company expects a loss of 24 to 28 cents per share in the fiscal first quarter, which ended on Sept. 30. It previously predicted a loss of 3 cents to 8 cents per share. That included a charge of 10 cents per share stemming from the job cuts. Analysts had expected a loss of 1 cent per share, according to a FactSet poll.
The company also cut its outlook for revenue to $48 million to $50 million from $55 million to $61 million. Wall Street had predicted $58 million.
The company will report full financial results on Oct. 23.
Sterne Agee's Peter Arment lowered Mercury Computer to "Neutral" from "Buy," saying the uncertainty around defense budget cuts next year made him less confident about the company's business potential. He cut his earnings estimates on the company through fiscal year 2014.
Jefferies analyst Howard Rubel cut his price target on the shares to $7.70 from $12 and lowered his 2013 earnings estimate to 15 cents per share from 50 cents per share.
Analysts overall now expect the company to post a profit of 25 cents per share in the year that ends in June 2013. On Wednesday, they had predicted profit of 46 cents for the fiscal year.
Shares dropped $1.64 to $8 in premarket trading. In regular trading over the past 12 months, shares have ranged from $8.51 to $15.88