The Motley Fool

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.

UXC

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.

DID YOU KNOW... The Motley Fool’s top analysts have just completed a brand-new free report on their top pick for 2015. Be among the first to get the name and code right now. (Hint: It’s a sexy ASX tech company!) Simply click here for your FREE copy... BEFORE the investing crowd gets wind of this!

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

NEW. Five Cheap and Good Stocks to Buy in 2019…

Our Motley Fool experts have just released a brand new FREE report, detailing 5 dirt cheap shares that you can buy today.

One stock is an Australian internet darling with a rock solid reputation and an exciting new business line that promises years (or even decades) of growth… while trading at an ultra-low price…

Another is a diversified conglomerate trading near a 52-week low all while offering a 2.8% fully franked yield…

Plus 3 more cheap bets that could position you to profit over the next 12 months!

See for yourself now. Simply click the link below to scoop up your FREE copy and discover all 5 shares. But you will want to hurry – this free report is available for a brief time only.

CLICK HERE FOR YOUR FREE REPORT!