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Unisys Corporation (UIS - Free Report) incurred third-quarter 2017 GAAP loss of $41.1 million or loss of 81 cents per share compared with loss of $28.2 million or loss of 56 cents per share in the year-earlier quarter. The deterioration was primarily due to a decline in revenues. The reported loss was significantly wider than the Zacks Consensus Estimate of a loss of 18 cents.
Non-GAAP earnings in the reported quarter were $21 million or 29 cents per share compared with $29.9 million or 41 cents per share in the year-ago quarter.
Unisys Corporation Price, Consensus and EPS Surprise
Total revenues declined 2.5% year over year to $666.3 million primarily due to lower revenues from the Services segment. Reported revenues beat the Zacks Consensus Estimate of $635 million.
New business TCV (total contract value) increased 38% year over year to $214 million. Total TCV of $624 million for the quarter was down 44% year over year, largely due to a large 12-year contract signed in third-quarter 2016. The company’s Services backlog was up 1% sequentially to $3.7 billion. New business pipeline grew 18% year over year to $9.6 billion while total sales pipeline improved 22% to $12.3 billion. Total non-GAAP operating profit margin was 7.3%, up 60 basis points (bps) year over year. EBITDA for the quarter decreased to $11.6 million from $28.5 million in the prior-year quarter while adjusted EBITDA improved marginally to $88.6 million from $87.3 million for the respective periods.
Segmental Performance
Revenues from the Services segment came in at $575.5 million, down 4.2% year over year. Services operating margin was 3%, up 60 bps year over year. The Technology segment’s revenues improved to $90.8 million from $82.4 million in the year-earlier quarter. Technology operating margin came in at 31% compared with 32% in the year-ago period due to higher sales of low margin hardware and third-party products.
Balance Sheet & Cash Flow
As of Sep 30, 2017, Unisys had $598.7 million in cash and cash equivalents with long-term debt of $631.5 million. The company entered into a new five-year revolving credit facility to replace the existing one, which was scheduled to mature in June 2018. Unisys also reduced future pension funding exposure in European pension plans, including freezing the last significant open defined benefit plan.
For the first nine months of 2017, the company utilized $36.3 million cash compared with operating cash flow of $103 million in the year-ago period, resulting in adjusted free cash utilization of $5 million compared with adjusted free cash flow of $162.5 million for the respective periods.
Outlook
Unisys reaffirmed its guidance for full-year 2017. The company continues to expect revenues in the range of $2.65-$2.75 billion and adjusted free cash flow in the of $130-$170 million range. Non-GAAP operating profit margin is expected to be between of 7.25% and 8.25%.
Unisys has been restructuring its business to improve profitability. This restructuring strategy includes lowering headcount, selling non-core businesses and revamping its sales strategy while investing in a few higher-growth areas such as outsourcing. We expect the company to continue with its cost-control initiatives and put greater effort toward sales growth, as it strives to overcome operational weaknesses. Notably, during the reported quarter, the company inked several contracts. All these deals are likely to propel top-line growth in the coming quarters.
CDK Global has long-term earnings growth expectations of 15%. It has a positive earnings surprise history with an average of 11.4% in the trailing four quarters, beating estimates in each.
CDW Corporation has a positive earnings surprise history with an average of 4.2% in the trailing four quarters, comprehensively beating estimates twice.
DXC Technology has long-term earnings growth expectations of 8%. It has a positive earnings surprise history with an average of 25.7% in the trailing four quarters, comprehensively beating estimates in each.
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Unisys (UIS) Lags Q3 Earnings Estimates, Affirms Guidance
Unisys Corporation (UIS - Free Report) incurred third-quarter 2017 GAAP loss of $41.1 million or loss of 81 cents per share compared with loss of $28.2 million or loss of 56 cents per share in the year-earlier quarter. The deterioration was primarily due to a decline in revenues. The reported loss was significantly wider than the Zacks Consensus Estimate of a loss of 18 cents.
Non-GAAP earnings in the reported quarter were $21 million or 29 cents per share compared with $29.9 million or 41 cents per share in the year-ago quarter.
Unisys Corporation Price, Consensus and EPS Surprise
Unisys Corporation Price, Consensus and EPS Surprise | Unisys Corporation Quote
Inside the Headlines
Total revenues declined 2.5% year over year to $666.3 million primarily due to lower revenues from the Services segment. Reported revenues beat the Zacks Consensus Estimate of $635 million.
New business TCV (total contract value) increased 38% year over year to $214 million. Total TCV of $624 million for the quarter was down 44% year over year, largely due to a large 12-year contract signed in third-quarter 2016. The company’s Services backlog was up 1% sequentially to $3.7 billion. New business pipeline grew 18% year over year to $9.6 billion while total sales pipeline improved 22% to $12.3 billion. Total non-GAAP operating profit margin was 7.3%, up 60 basis points (bps) year over year. EBITDA for the quarter decreased to $11.6 million from $28.5 million in the prior-year quarter while adjusted EBITDA improved marginally to $88.6 million from $87.3 million for the respective periods.
Segmental Performance
Revenues from the Services segment came in at $575.5 million, down 4.2% year over year. Services operating margin was 3%, up 60 bps year over year. The Technology segment’s revenues improved to $90.8 million from $82.4 million in the year-earlier quarter. Technology operating margin came in at 31% compared with 32% in the year-ago period due to higher sales of low margin hardware and third-party products.
Balance Sheet & Cash Flow
As of Sep 30, 2017, Unisys had $598.7 million in cash and cash equivalents with long-term debt of $631.5 million. The company entered into a new five-year revolving credit facility to replace the existing one, which was scheduled to mature in June 2018. Unisys also reduced future pension funding exposure in European pension plans, including freezing the last significant open defined benefit plan.
For the first nine months of 2017, the company utilized $36.3 million cash compared with operating cash flow of $103 million in the year-ago period, resulting in adjusted free cash utilization of $5 million compared with adjusted free cash flow of $162.5 million for the respective periods.
Outlook
Unisys reaffirmed its guidance for full-year 2017. The company continues to expect revenues in the range of $2.65-$2.75 billion and adjusted free cash flow in the of $130-$170 million range. Non-GAAP operating profit margin is expected to be between of 7.25% and 8.25%.
Unisys has been restructuring its business to improve profitability. This restructuring strategy includes lowering headcount, selling non-core businesses and revamping its sales strategy while investing in a few higher-growth areas such as outsourcing. We expect the company to continue with its cost-control initiatives and put greater effort toward sales growth, as it strives to overcome operational weaknesses. Notably, during the reported quarter, the company inked several contracts. All these deals are likely to propel top-line growth in the coming quarters.
Unisys currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the industry are CDK Global, Inc. , CDW Corporation (CDW - Free Report) and DXC Technology Company (DXC - Free Report) , each carrying Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
CDK Global has long-term earnings growth expectations of 15%. It has a positive earnings surprise history with an average of 11.4% in the trailing four quarters, beating estimates in each.
CDW Corporation has a positive earnings surprise history with an average of 4.2% in the trailing four quarters, comprehensively beating estimates twice.
DXC Technology has long-term earnings growth expectations of 8%. It has a positive earnings surprise history with an average of 25.7% in the trailing four quarters, comprehensively beating estimates in each.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
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