Unisys Rises 38% in 3 Months: Should Investors Buy UIS Stock?

Core Viewpoint - Unisys has shown strong performance in the stock market, significantly outperforming its sector and peers, driven by robust demand for AI and cloud transformation solutions [1][2]. Financial Performance - Unisys shares have returned 37.7% over the past three months, while the Zacks Computer & Technology sector declined by 0.7% [1]. - The company expects revenues for 2024 to grow between negative 1.5% and positive 1.5% in constant currency, with reported revenues anticipated to grow between negative 1.7% and positive 1.3% [3]. - For the third quarter of 2024, Unisys anticipates revenues to grow mid-to-high single digits year-over-year, equating to approximately $485 million to $490 million [6]. Business Segments - The Digital Workplace Solutions (DWS) segment is expected to see strong growth, with new business contract values increasing over 60% in the first half of 2024 [4]. - License and Support (L&S) revenues within the Enterprise Computing Solutions segment are projected to be $375 million for the full year [4]. Cash Flow and Expenditures - Free cash flow for 2024 is expected to be $10 million, with capital expenditures estimated between $85 million and $95 million [5]. Earnings Estimates - The Zacks Consensus Estimate for 2024 earnings is currently at 24 cents per share, a significant improvement from a loss of 28 cents per share over the past 60 days [7]. - The consensus for 2024 revenues is pegged at $2 billion, indicating a growth of 21.51% over the 2023 reported figure [7]. Long-term Prospects - Unisys expects DWS revenues to grow sequentially throughout the second half of 2024 and into 2025, driven by new logo wins [9]. - The company anticipates strong top-line growth and improved efficiency in the DWS business, aiming for an annual gross margin expansion of 150 to 200 basis points through 2026 [10]. Valuation - Unisys shares are currently trading at a low Price/Sales ratio of 0.19X compared to the sector's 6.32X, suggesting the stock is undervalued despite strong growth prospects [11]. - The company is noted for its strong liquidity with no borrowings and no major debt maturities until November 2027 [10]. Investment Sentiment - Unisys is benefiting from strong demand for its solutions and improved gross margins, making it an attractive investment opportunity [12]. - The stock is currently above the 50-day moving average, indicating a bullish trend, and has a Zacks Rank of 1 (Strong Buy) [13].