Unisys Corporation UIS is set to release its third-quarter 2024 results on Oct. 29.
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.
The Zacks Consensus Estimate for revenues is pegged at $489 million, suggesting growth of 5.25% year over year. The consensus estimate for third-quarter loss is pegged at 4 cents per share, unchanged over the past 60 days.
UIS’ earnings beat the Zacks Consensus Estimate in all the trailing four quarters, the earnings surprise being 87.69%.
Unisys Corporation Price and EPS Surprise
Unisys Corporation price-eps-surprise | Unisys Corporation Quote
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Key Factors to Drive UIS’ Q3 Earnings
Unisys’ third-quarter 2024 results are expected to have benefited 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. UIS 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.
UIS has been seeing strong growth in new opportunities within modern workplace solutions, particularly in unified endpoint management and device subscription services. This is also expected to positively influence third-quarter top-line growth.
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.
For third-quarter 2024, Unisys’ expects approximately $90 million of License and Support (L&S) revenues. Ex-L&S revenues are expected to experience low-single-digit constant currency growth.
UIS Underperforms Sector, Industry
UIS shares have declined 5% year to date (YTD), underperforming the Zacks Computer & Technology sector’s return of 25.6% and the Zacks IT Services industry’s 10.7%.
UIS Lags Sector YTD
Image Source: Zacks Investment Research
UIS stock is trading cheaper, as suggested by the Value Score of A.
In terms of the forward 12-month Price/Sales ratio, UIS is trading at 0.18X, lower than the sector’s 6.14X and the industry’s 6.69X.
It is also cheaper than industry peers like Accenture ACN and CyberArk CYBR, which are currently trading at a forward 12-month P/S of 3.27X and 11.21X, respectively.
Price/Sales Ratio (F12M)
Image Source: Zacks Investment Research
UIS’ Expanding AI Footprint Aids Prospect
Unisys is well-positioned to gain from increasing demand for AI-enabled solutions. This includes multi-cloud applications, AI Ops, and data center management. Its next-generation SS&C industry solutions within ECS are accessible on public and private clouds.
OEM partner Dell Technologies DELL has a validated design integrating Unisys logistics optimization into Dell’s AI rating service.
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 the company 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.
Conclusion
Unisys’ third-quarter 2024 results are likely to benefit from rising demand for AI and cloud-based services. Impressive growth and strong valuation make the stock attractive for growth-oriented investors. Hence, investors who already own the stock may expect the company's growth prospects to be rewarding over the long term.
UIS currently has a Zacks Rank #3 (Hold), suggesting that it may be wise to wait for a more favorable entry point in the stock.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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