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Unisys: Q4 Slight Miss, Pressing A Reset Button In 2020

Mar. 01, 2020 10:33 PM ETUnisys Corporation (UIS)


  • Q4 figures are below our and market expectations as Service segment is softer than expected.
  • 2020 is a transition year which is reflected in mild guidance - on par with our expectations.
  • 2021 is expected to be a strong year with high single-digit growth and improving profitability.
  • Softer results and overall stock market sell-off drag the stock price down, presenting a good buying opportunity.

Unisys (NYSE:UIS) has released its Q4 financial figures on February 25. The results slightly missed our and market expectations; however, with no major surprises.

Following the results, the stock plummeted - 5.4% while subsequently closing at -3.8% and in line with the major indices (NASDAQ -3.6%; NYSE - 3.1%) as the market was suffering from increasing pressures of COVID-19. Given the similar magnitude of the stock and the market decline, we believe it's fair to assume a muted stock reaction explained by the release of financial figures.

Overall, in the conference call, the management sounded rather conservative pointing out that 2019 was an abnormal strong year for Unisys with 2020 being softer. Sales growth should be rather flattish (midpoint) which is in line with our expectations and beating the market consensus, which expected a -4% decline. The management expects a mild margin decline, we reckon explained by the sale of the US business, which operates at above group-average margin levels, while core business ("Enterprise") margins should stay roughly flat.

As mentioned in our last article, we see 2020 as a transition year and working toward increasing backlog levels, which saw a considerable decline in 2019 to $4.3b (-10% y/y). Overall, we continue to see Unisys as an attractive buying opportunity backed by new customer wins, improving operating metrics and solid growth prospects, as the sale of US Fed business frees up financial resources.

In the conference call, the management explicitly mentioned no material impact from COVID -19 outbreak with revenue share in China accounting for less than 5% and no expansion expected.

The company will host Investors Day on April 29, where it presents a new strategy, financial performance and financial implications of US Fed business sale.

Chart 1: Sharp stock increase following the sale announcement

ChartData by YCharts


This article was written by

I am a former sell-side analyst with over 10 years of experience in the German small & mid-cap software market. Most of the German companies I cover, I know for years and have been closely working with the management. To uncover investment opportunities in other regions and profit from the overall growth dynamics in the software industry, as a transition to SaaS and cloud is evolving, I am expanding my coverage to include other European and North American software players.My goal is to write insightful and thorough research articles (à la sell-side style) for the companies I am either invested or considering investing in. I am based in Frankfurt, Germany.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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