Unisys Shares Jumped: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of IT service provider Unisys (NYS: UIS) soared 30% on Tuesday after its quarterly results thumped Wall Street estimates.

So what: Unisys' third-quarter was so outstanding -- earnings more than doubled to $78.6 million, or $1.63 per share, versus the consensus of just $0.70 -- that investors are being forced to drastically raise their growth expectations. Unisys shares have been hurt on concerns over IT spending cuts, but strong demand for its ClearPath servers and steady overseas growth seem to be more than offsetting the decline in its U.S. federal segment.

Now what: I'd be cautious about riding this wave of optimism. While Unisys' quarter was certainly impressive, its intense competitive environment, super-high beta of four, and history of less-than-stellar margins should give long-term investors some pause -- especially after a 30% spike. In other words, larger, more profitable, and more established rivals like Accenture (NYS: ACN) and IBM (NYS: IBM) seem like safer bets right now.

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At the time thisarticle was published Fool contributor Brian Pacampara owns no position in any of the companies mentioned. The Fool owns shares of IBM. Motley Fool newsletter services have recommended buying shares of Accenture. Try any of our Foolish newsletter services free for 30 days.We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy always gets a perfect score.

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