Unisys (UIS) Poised To Benefit From Core Business Focus

On Mar 19, we issued an updated research report on Unisys Corporation (NYSE:UIS) .

Information technology firm Unisys has been restructuring business to improve profitability. The restructuring plan includes selling non-core businesses and revamping sales strategy, investing in a few higher-growth areas such as outsourcing. We expect the company to continue with its cost-control initiatives and put greater effort toward sales growth, as it strives to overcome operational weaknesses. Unisys is focusing on building specialized industry skills and resources required to capitalize on industry-specific project opportunities. The company is investing heavily in developing a team dedicated to pursue growth opportunities for application-managed services for both existing and new clients. These application-based managed services capability will enable Unisys to effectively pursue long-term application outsourcing opportunities, associated application modernization and project work implementation.

Further, Unisys is focusing its resources and investments in four targeted, high-potential market areas, including security (IT security and physical security), data center transformation and outsourcing services, end-user outsourcing and support services, and applications modernization and outsourcing services. As it seeks to keep pace with the evolution in the IT industry, the company’s services unit is poised to take advantage of the growth prospects in higher-margin services. Unisys has secured quite a few contracts in these segments recently that should propel its top-line in the coming quarters.

In addition, the information technology industry is presently undergoing a transition phase, forging new disruptive trends in cloud mobility, Big Data, social computing and increasing awareness of cyber security. In order to capitalize on these trends, Unisys is rationalizing its services and solution portfolio by shifting offerings to cloud-based and software-as-a-service delivery models. Unisys continued its transition to a more asset-lite business model, which resulted in reduced CapEx needs and improved cash flow. The company successfully executed its vertical go-to-market strategy, including hiring leaders of key sectors. The company is also concentrating on business opportunities in though fewer but more profitable sectors in the IT marketplace.

Unisys stock has returned 40.1%, outperforming the industry’s 8.5% gain in the last three months. The company reported strong fourth-quarter 2017 results with healthy year-over-year increase in revenues and earnings. Adjusted earnings for the quarter were $127 million or $1.75 per share compared with $43.2 million or 60 cents in the year-earlier quarter. The bottom line comfortably beat the Zacks Consensus Estimate of 18 cents. The year-over-year increase in adjusted earnings was aided by a healthy rise in revenues and a moderate decline in operating expenses. Total revenues came in at $746.6 million compared with $721.7 million in the year-ago quarter. It surpassed the Zacks Consensus Estimate of $698 million.

We remain impressed with the inherent growth potential of this Zacks Rank #1 (Strong Buy) stock. Some other top-ranked stocks in the industry worth mentioning are CoStar Group, Inc. (NASDAQ:CSGP) , DXC Technology Company (NYSE:DXC) and MAM Software Group, Inc. (NASDAQ:MAMS) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

CoStar Group has a long-term earnings growth expectation of 16.8%. It surpassed estimates thrice in the trailing four quarters with an average positive earnings surprise of 18.3%.

DXC Technology has a long-term earnings growth expectation of 10.5%. It surpassed estimates in each of the trailing four quarters with an average positive earnings surprise of 23.9%.

MAM Software Group has topped estimates in each of the trailing four quarters with an average positive earnings surprise of 94.8%.

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