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What does UXC Limited’s 10% surge mean for the tech services sector?

The earnings drought in the information technology (IT) sector might have finally been broken with UXC Limited (ASX: UXC) the latest to announce a profit upgrade ahead of the February reporting season.

The business IT solutions firm is forecasting a circa 85% surge in pre-tax profit to about $8.5 million and a 10.4% jump in revenue to around $322 million for the six months to end December 2014.

The upgrade stands in contrast to management’s previous guidance at UXC’s annual general meeting when it predicted a “more than 50%” uplift in profit before tax and an 8% increase in sales.

UXC jumped over 10% in morning trade to a one-month high of 78.5 cents but there’s plenty of room left for it to play catch up with the stock still down 26% over the past 12 months.


The last two months of calendar 2014 had been particularly strong for the group, which will post its official first half results on February 26.

The update bodes well for the outlook for the sector, which has been hit by IT budget cutbacks at both the corporate and government levels due to the uncertain economic conditions.

UXC isn’t the only one bearing good tidings. I wrote about Prophecy International Holdings Limited (ASX: PRO) surging 13% in early January on management’s guidance of record earnings, while Data#3 Limited (ASX: DTL) told shareholders two months ago to expect solid growth in first half profits.

Prophecy has continued to hold on to those gains while Data#3 is up close to 4% since its market update on November 21, or 3% ahead of the S&P/ASX 200 Information Technology Index.

I suspect we will see further upgrades in the sector as companies and governments find themselves unable to hold off spending on IT any longer.

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Motley Fool contributor Brendon Lau does not own stocks mentioned in this article.

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