Earnings Preview: Accenture plc – Analyst Blog
Fourth Quarter Overview
Accenture delivered modest fourth quarter results, matching the Zacks Consensus Estimate on the bottom line. The quarter’s earnings came in at 88 cents per share, down 3.5% from the year-ago quarter due to a higher tax rate, lower non-operating income as well as foreign-exchange headwinds, partially offset by higher margins and a lower share count.
The company’s reported revenue increased 2.2% year over year to $6.69 billion, which moderated from the previous quarter due to weak segment performances and Euro issues. Consulting revenue dropped 4.0% to $3.74 billion. However, Outsourcing revenues increased 10.0% from the year-ago quarter to $3.10 billion.
Gross margin fell short of the year-ago figure due to higher subcontractor costs, recruitment and training costs as well as an increase in annual compensation. But due to operating cost control, operating margin remained unchanged at 13.8%.
Accenture projects a solid sequential increase in its first quarter 2013 revenue even after including a 3% negative foreign-exchange impact.
For fiscal 2013, management expects net revenue to grow in the range of 5.0% to 8.0%. Expectation for new bookings is in the range of $31.0 billion to $34.0 billion. The company continues to expect operating margin in the range of 14.0% to 14.1% and the annual tax rate between 26.0% and 27.0%. Diluted EPS expectation is between $4.22 and $4.30.
Agreement of Analysts
The analysts are of opinion that Accenture’s consulting/outsourcing/offshore combination continues to see global enterprise client demand for high-end but cost effective service delivery. Given its global footprint and client base, Accenture will remain well positioned to benefit from multiple technology drivers including cloud initiatives, SaaS (software as a service), mobility, digital marketing, and analytics among others.
Some analysts expect Accenture to meet its own guidance for the first quarter. But they also believes that macro uncertainties, European exposure, foreign exchange headwinds, slowing bookings growth and a discretionary spending environment will lead the company to maintain its fiscal 2013 outlook.
All the 18 estimates for the first quarter remained unchanged for the last 30 days. However, out of the 21 estimates for fiscal 2013, only one was revised upward in the past 30 days. The limited movement since Accenture reported fourth quarter results suggests that there is a lack of driving events.
Magnitude of Estimate Revisions
The Consensus Estimate for the first quarter and fiscal 2013 remained unchanged at $1.04 and $4.27, respectively, over the past 30 days. But we do notice upward movements over the past 90 days. Estimates grew 3.0% (3 cents) and 3.4% (14 cents) for the first quarter and fiscal 2013, respectively. We believe that the positive estimate revisions reflect the company’s upbeat guidance.
We are encouraged by management’s first quarter outlook and its assurance to continue investing in priority industries (such as Communications), emerging markets, other geographical regions as well as boosting its brand value. We believe that these would act as catalysts to the stock.
But stiff competitive pressure from International Business Machines Corp. (IBM), Computer Sciences Corp. (CSC) and Unisys Inc. (UIS), a strained spending environment and Accenture’s broad European exposure are concerns.
Currently, Accenture has a #3 Rank (Hold).