) reportedsecond-quarter 2014 adjusted earnings per share of 11
cents versus 91 cents in the prior-year quarter, significantly
missing the Zacks Consensus Estimate of 40 cents. Adjusted net
income came in at $6 million, plungin g 87% from the prior-year
figure of $46 million. Earnings were negatively impacted by
declining revenues across the segments, specifically in the systems
integration and infrastructure services businesses.
Unisys Corporation - Earnings Surprise |
The company reported a GAAP net loss of $12.1 million or 24 cents
per share compared with a net income of $20.4 million or 46 cents
per share in the year-ago quarter. The substantial year-over-year
decrease was attributable to a decline in revenues, along with
charges related to $21.9 million of pension expense.
Total revenue declined 6.1% to $806.4 million, compared with
$858.6 million in the prior-year quarter. The slump in revenues was
due to lower sale of technology projects. While revenues from the
U.S decreased 10%, international revenues slipped 3% year over
segment, revenues fell 3.6% year over year to $712.9 million,
impacted by lower systems integration and infrastructure services
revenues, partially offset by growth in outsourcing and core
maintenance. Service orders showed significant improvement both
sequentially and year over year, driven by growth in outsourcing
orders. Total Services backlog at quarter-end was $4.7 billion. As
a consequence of weaker revenues, gross profit margin for the
segment declined to 16.8% from 18.2% a year ago.
segment revenues dropped 21.4% from the year-ago quarter to $93.5
million due to lower sales of ClearPath enterprise software and
servers. Gross profit margin for the segment decreased to 50.2%
from 59.4% in the year-ago quarter.
Balance Sheet/Cash Flow
Cash generated by operating activities totaled $3.3 million in
the second quarter of 2014 compared with $16.1 million in the
prior-year quarter. The company incurred capital expenditure of $45
million in the reported quarter versus $38 million in the
year-earlier quarter. Free cash flow before pension contributions
declined to $6.1 million from $12.6 million in the year-ago
At quarter end, Unisys had a long-term debt burden of $210
million, with cash and cash equivalents of $574 million. During the
quarter, the company returned $13.1 million to shareholders through
repurchase of common stock. The company has repurchased $25.7
million of common shares in total under a $50 million share
repurchase program that expires on December 31, 2014.
Management expects to face persistent challenges in the coming
quarters as it grapples with the softness in some of its product
lines. However, the company is encouraged by its improved
sequential performance and is hopeful of achieving better results
in the second half of the year. Within the Technology segment,
Unisys expects strength in ClearPath sales as well as increased
market traction in its Stealth cybersecurity and Forward! server
products, in the near term.
The information technology industry is presently going through a
transition phase with unsettling trends in cloud mobility and big
data. Accordingly, Unisys is rationalizing its services and
solution portfolio and is shifting its offerings to cloud-based and
software-as-a-service delivery models. We expect the company to
continue with its cost-control initiatives and put greater effort
towards sales growth, as it overcomes the operational
Unisys currently has a Zacks Rank #3 (Hold). Other stocks that
look promising include
Barracuda Networks, Inc.
Science Applications International Corporation
), each holding a Zacks Rank #2 (Buy).
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