Blue Bell, Pennsylvania based Unisys Corporation (UIS), an information technology (IT) company, has recently announced to buyback a total of $50 million worth of its common stock and mandatory convertible preferred stock, thereby leveraging earnings power.
The company seeks to execute the program either in the open market or through negotiated purchases. Meanwhile, the transaction is expected to comply with 10b5-1 plans.
According to the new share repurchase program, the company will have the discretionary power to repurchase its common stock at any time depending on the prevailing market condition and other associated factors.
This share buyback, to be conducted through December 31, 2014, enhances the company’s confidence in its current performances and long-term targets. At the same time, the share buyback will help Unisys reduce the share count, thereby increasing earnings per share and return on equity.
Earlier, Unisys had posted a net loss (including pension expenses) of $12.4 million or 28 cents per share in the third quarter of 2012 compared with a net income of $46.6 million or 99 cents per share in the previous quarter. Excluding these charges and expenses, net income for the quarter came in at 85 cents per diluted share, easily beating the Zacks Consensus Estimate of 57 cents per share.
In addition, the company had a cash balance of $542 million and total debt of $211 million. Its healthy balance sheet position and positive free cash flow support the buyback program.
In a different story, the company recently announced to pay a dividend of $1.5625 per share based on its outstanding 6.25% Mandatory Convertible Preferred Stock, Series A. The dividend will be paid on March 1, 2013 to shareholders of record as on February 15, 2013. The company’s proactive advances will not only help enhancing investors' confidence in the company but also boost the market value of the outstanding shares.
Unisys competes with bigwigs like Accenture plc (ACN) and Hewlett-Packard Company (HPQ). Hewlett-Packard has also been consistently enhancing shareholders’ returns. In the fiscal fourth quarter of 2012, Hewlett-Packard paid a total of $384 million to shareholders through share repurchases and dividends.
The current Zacks Consensus Estimates for Unisys are $1.00 and $2.20 for the fourth quarter of 2012 and for the full year of 2012, respectively. The estimates represent year-over-year growth of (51.8%) for the fourth quarter of 2012 and (50.23%) for 2012.
As the macroeconomic conditions continue to be challenging, we prefer to have a Zacks #5 Rank on the stock, which translates into a short-term rating of ‘Strong Sell’. In the long run, we have a Neutral recommendation on the stock.