What happened

Shares of Unisys (UIS -1.11%) fell as much as 20.1% on Tuesday, following the information technology veteran's fourth-quarter earnings report. The company beat Wall Street's estimates across the board, but investors seemed to be itching for an excuse to take the edge off this stock's market-beating gains in recent months. Management's modest revenue guidance for the next fiscal year gave them a trigger to pull. By 3:25 p.m. EST, shares had partly recovered to a 9.5% drop.

So what

In the fourth quarter of 2020, Unisys saw revenue increase 5.5% year over year to $577 million. Your average analyst was looking for $556 million. Adjusted earnings rose from $0.60 to $0.73 per diluted share, leaving the analyst consensus of $0.45 per share far behind. Adjusted operating margin more than doubled from 6% to 14% thanks to strong renewals of Unisys ClearPath Forward software and service subscriptions.

A yellow charting arrow trending downward.

Image source: Getty Images.

Looking ahead, management expects full-year sales to grow by approximately 1% in 2021. The top-line growth should accelerate in 2022 and beyond "as we emerge from the COVID-impacted period and grow our [end-user experience] offerings," CEO Peter Altabef said on the earnings call.

Now what

Don't cry for Unisys investors today. The stock is still up 56% over the last 52 weeks, even after Tuesday's sudden drop. Share prices have climbed 93% higher over the last three months alone -- again, including today's sharp correction.

The stock looks reasonably valued today at 21.5 times trailing earnings. The widening profit margins should support Unisys' bottom-line results until the top-line sales spring back to life in 2022, assuming that management's subscription and end-user experience strategies work out as planned. Unisys isn't a screaming buy at this level, but the stock could be worth a closer look if share prices drop any lower.