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Unisys Rises 38% in 3 Months: Should Investors Buy UIS Stock?
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Unisys (UIS - Free Report) shares have returned 37.7% in the past three months, outperforming the Zacks Computer & Technology sector’s decline of 0.7%.
Over the same time frame, while shares of Accenture have returned 17.2%, Roper Technologies and Cerence registered drops of 2% and 5.3%, respectively.
Unisys’ prospects benefit from strong demand for AI, cloud transformation and a cross-mix of solutions and services. New business signings increased 25% year over year in the first half of 2024. It exited the second quarter of 2024 with a backlog of $2.8 billion, up 4% year over year and relatively flat on a sequential basis.
Do these drivers make the Unisys stock a buy right now? Let’s dig deeper to find out.
UIS Outperforms Sector
Image Source: Zacks Investment Research
Unisys’ 2024 Guidance Encouraging
For 2024, Unisys now expects revenues to grow in the negative 1.5% to positive 1.5% constant currency. Adjusting for forex rates, reported revenues are expected to grow between negative 1.7% and positive 1.3%.
UIS expects the Digital Workplace Solutions (“DWS”) growth trajectory to be strong in the second half of 2024. The total contract value of DWS’ new business jumped more than 60% in the first half of 2024, driven by a higher ratio of recurring managed services in its new logo signing.
License and Support (L&S) revenues within the Enterprise Computing Solutions segment are expected to be $375 million for the full year.
It expects an adjusted operating margin between 5.5% and 7.5%.
Free cash flow for 2024 is expected to be $10 million, with capital expenditure between $85 million and $95 million.
For the third quarter of 2024, Unisys expects revenues to grow mid-to-high single digits on a constant currency year-over-year basis, which equates to roughly between $485 million and $490 million.
UIS’ Estimate Revision Shows Upward Movement
The Zacks Consensus Estimate for 2024 earnings is currently pegged at 24 cents per share, up from a loss of 28 cents per share over the past 60 days.
The consensus mark for 2024 revenues is pegged at $2 billion, suggesting growth of 21.51% over the 2023 reported figure.
The Zacks Consensus Estimate for third-quarter revenues is pegged at $489 million, indicating year-over-year growth of 5.25%.
The consensus mark for third-quarter 2024 loss is pegged at 4 cents per share, narrower than the loss of 15 cents over the past 60 days.
Unisys’ Long-term Prospects Are Bright
UIS expects DWS revenues to grow sequentially throughout the second half of 2024 and 2025 driven by the new logo wins in the first half of 2024.
Continuing growth in hybrid infrastructure and infrastructure as a service is expected to drive Cloud, Applications & Infrastructure Solutions. For 2024 through 2026, L&S revenues are expected to be $370 million on average.
Unisys expects strong top-line growth and improved efficiency in the DWS business to boost gross margin. It remains on track to achieve the top end of the 150 to 200 basis points of annual expansion UIS targets through 2026.
The company’s strong liquidity with no borrowings is noteworthy. UIS has no major debt maturities until the $485 million senior secured notes become due in Nov. 2027.
Unisys Shares Trade at a Discount
Unisys stock is cheap, as the Value Score of B suggests.
In terms of the forward 12-month Price/Sales ratio, UIS is trading at 0.19X, higher than the Zacks Computer & Technology sector’s 6.32X.
Price/Sales Ratio (F12M)
Image Source: Zacks Investment Research
We believe Unisys’ strong growth prospect does not justify this discounted valuation making it an attractive investment.
Here’s Why UIS Shares Are a Strong Buy
Unisys is benefiting from strong demand for its solutions and improved gross margin driven by delivery efficiency initiatives and much higher margin new business signings.
UIS shares are trading above the 50-day moving average, indicating a bullish trend.
UIS Trades Above 50-day SMA
Image Source: Zacks Investment Research
The Growth Score of A makes the stock attractive for growth-oriented investors.
Image: Bigstock
Unisys Rises 38% in 3 Months: Should Investors Buy UIS Stock?
Unisys (UIS - Free Report) shares have returned 37.7% in the past three months, outperforming the Zacks Computer & Technology sector’s decline of 0.7%.
This Blue Bell, PA-based IT solutions provider has also outperformed the Zacks Computers – IT Services industry and peers Cerence (CRNC - Free Report) , Accenture (ACN - Free Report) and Roper Technologies (ROP - Free Report) .
Over the same time frame, while shares of Accenture have returned 17.2%, Roper Technologies and Cerence registered drops of 2% and 5.3%, respectively.
Unisys’ prospects benefit from strong demand for AI, cloud transformation and a cross-mix of solutions and services. New business signings increased 25% year over year in the first half of 2024. It exited the second quarter of 2024 with a backlog of $2.8 billion, up 4% year over year and relatively flat on a sequential basis.
Do these drivers make the Unisys stock a buy right now? Let’s dig deeper to find out.
UIS Outperforms Sector
Image Source: Zacks Investment Research
Unisys’ 2024 Guidance Encouraging
For 2024, Unisys now expects revenues to grow in the negative 1.5% to positive 1.5% constant currency. Adjusting for forex rates, reported revenues are expected to grow between negative 1.7% and positive 1.3%.
UIS expects the Digital Workplace Solutions (“DWS”) growth trajectory to be strong in the second half of 2024. The total contract value of DWS’ new business jumped more than 60% in the first half of 2024, driven by a higher ratio of recurring managed services in its new logo signing.
License and Support (L&S) revenues within the Enterprise Computing Solutions segment are expected to be $375 million for the full year.
It expects an adjusted operating margin between 5.5% and 7.5%.
Free cash flow for 2024 is expected to be $10 million, with capital expenditure between $85 million and $95 million.
For the third quarter of 2024, Unisys expects revenues to grow mid-to-high single digits on a constant currency year-over-year basis, which equates to roughly between $485 million and $490 million.
UIS’ Estimate Revision Shows Upward Movement
The Zacks Consensus Estimate for 2024 earnings is currently pegged at 24 cents per share, up from a loss of 28 cents per share over the past 60 days.
The consensus mark for 2024 revenues is pegged at $2 billion, suggesting growth of 21.51% over the 2023 reported figure.
Unisys Corporation Price and Consensus
Unisys Corporation price-consensus-chart | Unisys Corporation Quote
The Zacks Consensus Estimate for third-quarter revenues is pegged at $489 million, indicating year-over-year growth of 5.25%.
The consensus mark for third-quarter 2024 loss is pegged at 4 cents per share, narrower than the loss of 15 cents over the past 60 days.
Unisys’ Long-term Prospects Are Bright
UIS expects DWS revenues to grow sequentially throughout the second half of 2024 and 2025 driven by the new logo wins in the first half of 2024.
Continuing growth in hybrid infrastructure and infrastructure as a service is expected to drive Cloud, Applications & Infrastructure Solutions. For 2024 through 2026, L&S revenues are expected to be $370 million on average.
Unisys expects strong top-line growth and improved efficiency in the DWS business to boost gross margin. It remains on track to achieve the top end of the 150 to 200 basis points of annual expansion UIS targets through 2026.
The company’s strong liquidity with no borrowings is noteworthy. UIS has no major debt maturities until the $485 million senior secured notes become due in Nov. 2027.
Unisys Shares Trade at a Discount
Unisys stock is cheap, as the Value Score of B suggests.
In terms of the forward 12-month Price/Sales ratio, UIS is trading at 0.19X, higher than the Zacks Computer & Technology sector’s 6.32X.
Price/Sales Ratio (F12M)
Image Source: Zacks Investment Research
We believe Unisys’ strong growth prospect does not justify this discounted valuation making it an attractive investment.
Here’s Why UIS Shares Are a Strong Buy
Unisys is benefiting from strong demand for its solutions and improved gross margin driven by delivery efficiency initiatives and much higher margin new business signings.
UIS shares are trading above the 50-day moving average, indicating a bullish trend.
UIS Trades Above 50-day SMA
Image Source: Zacks Investment Research
The Growth Score of A makes the stock attractive for growth-oriented investors.
Unisys currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.