Operating margin of 1.7% was up from 0.2% recorded a year ago but down from 2.2% registered in the previous quarter.

The management is still engaged in a multi-step strategy of reducing the cost structure of the company and focusing its resources on high growth areas of the IT market. It appears that UIS is now expected to demonstrate tangible results from its ongoing restructuring, after several execution missteps in the past. The management continues to target an operating margin goal of 8%-10% by the end of 2008. We maintain our Hold rating on Unisys.

Although management is making progress in expanding margins, we remain cautiously optimistic of the pace of IT spending recovery and the maturing of higher-margin legacy product sales and services. Accordingly, our target price stands at $4.25. This is derived by applying a P/S (price-to-sales) multiple of roughly 0.3x to our 2008 revenue estimate, which is below the industry median.

Anthracite Down to Fair Value

Anthracite Capital's (AHR) is a real estate finance company that operates as a real estate investment trust (REIT).

Operating earnings for 2Q08 were $0.23 per share, down from $0.36 per share in 2Q07, primarily due to the increase in loss assumptions on CMBS investments, and one-time loss reserve for a loan in Carbon II.

AHR is trading at 4.5x our 2008 estimated OEPS and 4.7x estimated EPS. On an EPS basis, the company is valued at a 17% premium to sector averages. Shares are off 38% over the past three months, due to a general sector decline and current liquidity problems in commercial and residential real estate.

The good news is that AHR has limited exposure to residential loans, and commercial real estate fundamentals are holding up for now. Due to recent equity sales, the company has the liquidity to pay its current dividend, get through the current market turmoil, and remain solvent. The company still has exposure to margin calls which entails risk should CMBS asset values continue to fall.

Commercial real estate values are falling, and we expect more write downs and delinquent loans in the coming quarters. As such, we would not be a buyer, even at the discounted price. Hold the shares for the yield, although the current payout is probably unsustainable so expect a dividend cut before the end of the year.

Assurant Target Bumped Down

Assurant Inc.'s (AIZ) core 2Q08 results were a nickel below our expectation. Based on diversified product and distribution platform and technology focus, AIZ has delivered solid operating earnings over the last five years.

However, continued dependence on third-party reinsurance and significant growth in specialty property exposes the group's earnings to a greater degree of variability over the near term. Therefore, we elect to keep our rating of the shares of this company as a Hold.

Following our review of AIZ's 2Q08 results we are decreasing our FY08 earnings expectation to $6.50 per share from $6.55 per share and our FY09 earnings expectation to $6.85 per share from $6.90 per share previously. The shares of Assurant currently trade at a multiple of 1.57x book value, excluding AOCI, of $36.68 per share for 2Q08 and 1.62x the $35.53 book value per share.

Based on general earnings trends, negligible catastrophe losses, we think the previously contracted price-to-book value of 1.60x should continue to be viewed more as a bottom range for this company. The company's price-to-book multiple is in-line with its peer group median level. We expect the company will eventually benefit from the overhangs in the sub-prime market with an offset in the price-to-book multiple to about in the coming quarters. For now however, we anticipate the company should trade close to 1.65x level, down from the close to priced-to-perfection level of 2.00x, recorded within the past year.

Therefore, we are decreasing our six-month target price to $63.40 per share from $70.60 per share, based on our book value expectation for $38.40 per share at December 31, 2008. At the current price level, this would imply a 10.9% total return potential over the next six-months.

AIG Rating Downgrade Ahead

Multi-line insurer Americal International Group, or AIG (AIG), has been dinged with yet another high profile downward earnings revision, totalling a baker's dozen in just the last month for the September quarter.' No fewer than 14 analysts have taken down estimates for fiscal year 2008 over the same time period.' The Zacks consensus is currently -32 cents per share, whereas a quarter ago that number was +$3.19 per share.

No big mystery, then, that AIG has suffered a 5.6% sell-off in its share price, from just under $20 per share to around $18.70.' In addition to the deluge of recent downward revisions, an AP report this morning cites the possibility that AIG's investment-grade rating of 'AA-' may be in jeopardy.' The report states that AIG is highly exposed to ongoing credit deterioration due to its "credit default swaps."

Then again, it's not only the large-cap insurer who has been taking it on the chin this morning.' The Dow is off over 200 points as of mid-day trading.' However, much of the negative sentiment settling on Wall Street so far today has to do with the weakness of financial companies such as AIG.