What happened
Shares of information technology specialist Unisys (UIS) rose as much as 10.7% on Tuesday morning following a solid fourth-quarter earnings report. The stock had retreated to a 6.2% gain as of 12:30 p.m. ET.
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So what
In the fourth quarter of 2021, Unisys saw top-line sales falling 6.5% year over year to $539 million. Adjusted earnings slid 30% lower, landing at $0.51 per diluted share. However, the analyst consensus pointed to earnings of roughly $0.36 per share on sales in the neighborhood of $540 million, making this a mixed report with strong, bottom-line profits and roughly in-line revenues. The financial results also measured up to management's guidance targets.
Now what
The lower sales were expected since they were the result of license-renewal timings on top of difficult year-over-year comparisons. Gross margins increased in each of Unisys' three reportable segments, led by a jump from 12% to 15% in the cloud and infrastructure division. Furthermore, free cash flows swung from a $390 million cash burn to a $44 million cash profit.
The positive market reaction makes sense in light of these robust results, but there's plenty of room for improvement. For one, Unisys has brought in outside consultants to help the company boost its own brand in the fragmented and intensely competitive market for IT services. Furthermore, the company is reviewing salaries and compensation across its workforce in an effort to cut costs, which sounds like a backwards move in a time of high inflation and a widespread demand for higher salaries.
So I'm quite content to wait and watch Unisys from the sidelines as the company works through these economic issues and branding problems.
