On Wednesday, Unisys Corporation (NYSE:UIS), a global information technology company, saw its shares target adjusted by Canaccord Genuity. The firm lowered the target to $4.25, down from the previous $5.00, while maintaining a Hold rating on the stock. This change reflects the analyst's view on the company's performance and outlook.
The analyst from Canaccord Genuity noted that Unisys is making strides in its corporate transformation, evidenced by a strong start to the year in new business bookings. The company has reportedly signed three times as much new business in the first half of the year as it did in the entirety of the previous year.
This performance has been accompanied by an improvement in margins within the broader services business, which have increased by approximately 350 basis points year-over-year.
Unisys's growth has been described as steady, albeit moderate, in next-generation service offerings that focus on the digital workplace and cloud/infrastructure. Furthermore, the company has been able to re-expand its services total addressable market (TAM) back into some traditional tech services areas, where margin potential is now seen as more favorable than in the past.
The report also highlighted that Unisys has benefited from reduced competition in some of these traditional service offerings, which has provided the company with a degree of pricing power. Despite these positive developments, some aspects of the company's performance remain obscured by a softer renewal cycle this year in its mature but high-margin software segment.
Canaccord Genuity's analysis indicates that excluding the variable mature Clearpath software renewal schedule, Unisys has become a more consistent organic top-line growth engine over the past few quarters. This assessment comes amid Unisys's ongoing efforts to improve its overall corporate cost structure, which has contributed to its current market position.
In other recent news, Unisys Corporation has reported a promising start to 2024, with its first quarter revenues and profits slightly exceeding market predictions. The company remains on track to meet its annual financial targets and is making headway towards its long-term cash flow objectives.
Unisys is prioritizing the growth of its Ex-L&S solutions and the expansion of its Ex-L&S gross margin to enhance profitability and cash generation. Even though there was a minor decrease in total company TCV, new logo TCV more than doubled, signaling robust market demand for their solutions.
These developments come amidst the company's ongoing efforts to improve operational efficiency, reduce SG&A costs, and boost free cash flow. Unisys is also expanding its addressable markets with offerings like Unisys logistics optimization and is prioritizing AI initiatives.
Despite a 1% decrease in total company TCV and a 5.5% YoY decrease in Q1 2024 total company revenue, Unisys anticipates revenue growth in the range of -1.5% to +1.5% for the full year and expects revenue growth to pick up in the second half of the year.
Unisys is committed to improving performance, accelerating growth, and achieving its long-term targets. The company plans to leverage significant net loss carryforwards to reduce cash taxes on increased profits and has set a target gross margin of 150 to 200 basis points for the year.
InvestingPro Insights
As Unisys Corporation (NYSE:UIS) navigates its corporate transformation, real-time data from InvestingPro offers additional context to the company's market position. The firm's market capitalization stands at a relatively modest $262.38 million, which could suggest room for growth or an indication of market challenges. Despite the adjustments in price targets and an optimistic view on new business bookings, Unisys has not been profitable over the last twelve months, with a negative P/E ratio of -0.75. This underlines the importance of the company's strategic shift towards higher-margin services and the need for consistent top-line growth.
InvestingPro Tips highlight that analysts have revised their earnings upwards for the upcoming period, reflecting a potential turnaround in Unisys's performance. Moreover, the company's stock has experienced a significant price drop over the last three months, which could present a buying opportunity for investors, especially considering that the company is trading at a low revenue valuation multiple. This aligns with Canaccord Genuity's note on the company's improvement in margins and re-expansion of services.
For investors seeking a more in-depth analysis, there are additional InvestingPro Tips available that can provide further guidance on Unisys's financial health and future prospects.
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