Investing.com -- Baird upgraded Mercury Systems Inc (NASDAQ: MRCY) to "Outperform" on optimism on defense electronics company's turnaround traction, supported by improved financial performance and reduced technical risks.

MRCY posted better-than-expected second-quarter results, with revenue jumping 13% year-over-year to $223.1 million, about 22% above consensus. Adjusted earnings per share came in at $0.07, beating expectations of a $0.05 per-share loss. Free cash flow surged to a record $81.9 million, compared to consensus of $15.4 million.

Baird raised its price target on the stock to $58 from $53, expecting valuation to normalize as execution improves. The firm also lifted its fiscal 2025 EPS estimate to $0.30, up $0.10.

While Mercury's backlog reached a record $1.35 billion, bookings fell 26% year-over-year to $242.4 million. However, management now anticipates mid-single-digit revenue growth for fiscal 2025, up from a prior flat outlook.

Baird noted that free cash flow generation of $122 million over the past three quarters is a company record, and the firm expects Mercury to return to its target business model by the end of fiscal 2025.