Why Conduent Inc. Stock Popped Today

What happened

Shares of Conduent Inc. (NYSE: CNDT) were up 12.9% as of 2 p.m. EST Wednesday after the IT service management specialist announced solid fourth-quarter 2017 results.

More specifically, Conduent's revenue declined slightly from last year's fourth quarter to $1.493 billion. That translated to adjusted net income of $67 million, or $0.31 per share, up from $61 million, or $0.29 per share in the same year-ago period. By comparison, consensus estimates predicted adjusted earnings of only $0.24 per share on roughly the same revenue.

So what

The results mark a strong end to Conduent's first year of independence after spinning off from Xerox (NYSE: XRX) in early 2017. Further, Conduent says it "overachieved" relative to its 2017 strategic transformation goals, leaving it well positioned to drive further savings in 2018.

"We focused around our core business and aggressively addressed our cost structure to deliver meaningful improvements in our margins and cash flow," added Conduent CEO Ashok Vermuri. "This will enable investments to modernize technology, improve our workplace, and strengthen our positioning as a digital interactions company."

Now what

Looking forward to the full-year 2018, Conduent expects revenue to be flat to down 3% from 2017, the midpoint of which compares favorably to estimates for a 2.6% decline. Meanwhile, adjusted EBITDA this year should increase 8% to 12% from $672 million last year, and free cash flow should arrive in the range of 25% to 35% of adjusted EBITDA. Conduent notes that this outlook is essentially in line with its previously communicated long-term goals.

All told, given Conduent's surprising profitability improvements, there was little not to like about Conduent's strong end to the year. With shares down nearly 10% (as of yesterday's close) from their post-spin-off highs set last May, it's no surprise to see Conduent stock surging today in response.

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Steve Symington has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.