Accenture plc (ACN) on Q3 2021 Results - Earnings Call Transcript
Company Representatives: Julie Sweet - Chief Executive Officer KC McClure - Chief Financial Officer Angie Park - Managing Director, Head of Investor Relations Operator: Ladies and gentlemen, thank you for standing by and welcome to Accenture’s Third Quarter Fiscal 2021 Earnings Call. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session. . And as a reminder, this conference is being recorded. I would now like to turn the conference over to our host, Managing Director, Head of Investor Relations, Ms. Angie Park. Please go ahead. Angie Park: Thank you, operator, and thanks everyone for joining us today on our third quarter fiscal 2021 earnings announcement. As the operator just mentioned, I am Angie Park, Managing Director and Head of Investor Relations. On today’s call, you will hear from Julie Sweet, our Chief Executive Officer and KC McClure, our Chief Financial Officer. We hope you’ve had an opportunity to review the news release we issued a short time ago. Julie Sweet : Thank you, Angie, and thank you everyone for joining us. We had another outstanding quarter reflecting our laser focus on creating 360 degree client value and the importance of our scale, experience, industry knowledge and trust to the world's leading companies and governments as they continue to digitally transform their enterprises. We had a record 20 clients with bookings over $100 million and a total of $15.4 billion in booking. We delivered 16% revenue growth in local currency, 3% above the top of our guided range with outstanding profitability and free cash flow. We estimate that we continue to take significant market share. Our growth was broad based across geographic markets and industries with 11 out of 13 industries growing double digits this quarter and reflects our ability to bring together our unmatched breadth of services from strategy and consulting to interactive technology and operations to create the solutions which achieve the value and speed that makes a difference to our clients. We continue to meet our clients’ strong demand adding a net 32,000 talented people this quarter alone. We offer an employee value proposition that allows us to attract top talent, develop our people with world class training and provide them with vibrant career paths. We are pleased with our record 117,000 promotions year-to-date, including almost 1,200 promotions to Managing Director, and while delivering these results we have raised the bar again in terms of investment. KC McClure : Thank you, Julie, and thanks to all of you for taking the time to join us on today's call. As you heard in Julie’s comments, we are extremely pleased with our results in the third quarter, which continue to reflect very strong momentum across all dimensions of our business. Based on the strength of our third quarter results, and the confidence we have in our fourth quarter to continue to expand our market leadership position, we are increasing our full year outlook which I will cover in more detail later in the call. Before I get into the details, let me summarize the major headlines of our third quarter results, which reflect continued superior execution against our three financial imperatives. Revenue increased nearly $2.3 billion, reflecting growth of 16% in local currency. Results were approximately $300 million above the top end of our guided range, driven by broad based over performance across the business with double digit growth in all three markets, four of five industry groups and in technology services and operations. Julie Sweet : Thanks KC. I’ll start with the environment. The dynamics in the market we are seeing are not only of recovery from the lower spending pattern at the onset of the pandemic, but a more sustained growth in demand as companies race to modernize and accelerate their digital initiatives with compressed transformation. Pre-COVID our research showed a digital achievement gap with leaders growing 2x faster than laggers and we estimate that gap has now widened to 5x, with leaders stepping up their investment in technology and innovation, and lead progress taking accelerated steps to catch up. Cloud is an even more critical enabler as companies are increasing their focus on enterprise wide transformations and rapidly moving to digital and cloud powered models. These needs of our clients are driving strong momentum in our business, with an acceleration of continued strong double digit growth across Applied Intelligence, Cloud, Industry X, Intelligent Operations and Security, with interactive and intelligent platform services returning to strong double digit growth this quarter. These strategic priorities are multi-service and are powered by our unparalleled technology ecosystem relationship. Let me share some color to bring this demand to life. I want to particularly highlight Cloud, which continues to have very strong double digit growth rates, as well as the subset of Accenture Cloud First with growth was even stronger and has exceeded our expectations when we formed Cloud First last September. With our Cloud First services we are helping agencies served by concept, Italy's National Procurement Agency to deliver on Italy's National Recovery and Resilience Plan. We are developing and running industry specific cloud based platforms to standardize and improve their efficiency and speed, reducing the time to launch new contracts and ultimately providing much improved services for Italy’s citizens. We are using our Intelligent Platform services to help DuPont, a company with a rich history of business reinvention. We imagine its financial structure to coordinate operations across its large geographic footprint. After going through a strategic and deliberate restructuring through M&A, we will now help DuPont implement essential finance processing suites that will help them to consolidate their multiple financial systems and chart of accounts into one and close the books faster. This will provide real-time review of results for all of the business units, all in the cloud, giving DuPont more agility, speed and certainty in a complex and volatile market. KC McClure: Thanks Julie. Let me now turn to our business outlook. For the fourth quarter of fiscal ’21, we expect revenue to be in the range of $13.1 billion to $13.5 billion. This assumes the impact of FX will be positive 4% compared to the fourth quarter of fiscal ‘20 and reflects an estimated 17% to 21% growth in local currency. For the full fiscal year ’21, based upon how the rates have been trending over the last few weeks, we continue to expect the impact of FX on our results in U.S. dollars will be approximately positive 3.5% compared to fiscal ‘20. For the full fiscal ’21, we now expect our revenues to be in the range of 10% to 11% growth in local currency over fiscal ’20, including approximately negative 1% from a decline in revenues from reimbursable travel, based on a 2% reduction the first half of the year and no material impact in the second half of the year. Importantly, organic revenue is the driver of the increase to our updated guidance as we still expect the inorganic contribution to remain at about 2.5% for the full year. For operating margin, we now expect fiscal year ‘21 to be 15.1% a 40 basis point expansion over fiscal ‘20 results. We now expect our annual adjusted effective tax rate to be in the range of 23% to 24%. This compares to an adjusted effective tax rate of 23.9% in fiscal ‘20. For earnings per share, we now expect full year diluted EPS for fiscal ‘21 to be in the range of $9.07 to $9.16. We now expect adjusted full year diluted EPS to be in the range of $8.71 to $8.80 or 17% to 18% growth over adjusted fiscal ‘20 results. For the full fiscal ‘21 we now expect operating cash flow to be in the range of $8.65 billion to $9.15 billion. Property and equipment additions to be approximately $650 million and free cash flow to be in the range of $8 billion to $8.5 billion. Our free cash flow guidance reflects a very strong free cash flow to net income ratio of 1.4 to 1.5. Finally, we continue to expect to return at least $5.8 billion through dividends and share repurchases as we remain committed to returning a substantial portion of our cash to our shareholders. With that, let's open it up so that we can take your questions. Angie? Angie Park: Thanks KC. I would ask that you each keep to one question and a follow-up to allow as many participants as possible to ask a question. Operator, would you provide instructions for those on the call. Operator: Thank you. It comes from the line of Lisa Ellis with MoffettNathanson. Please go ahead. Lisa Ellis: Hey, good morning and thank you. Great results here! A couple of questions; one is a little more tactical, one more strategic. The first one, in bookings KC, can you just remind us one, how acquisitions are not reflected in bookings and then on the related note, is the composition of your bookings changing at all? I'm just specifically thinking about these big $100 million plus transformation programs. Are you seeing a notable change in duration or anything like that? Just trying to understand the booking number a little bit and then I’ll follow up. Thank you. Julie Sweet: Okay, great, thanks Lisa. So let me just decompose bookings a little bit. So we were really pleased with our bookings this quarter right, $15.4 billion, and again that grew 39% in U.S. dollars, really strong book-to-bill 1.2%. And in terms of – when you look at it, there was very strong bookings about consulting and outsourcing, as well as all three geographic markets. And if you look at specifically in our V&A, which also was represented across all of those dimensions, there will be a slight impact in the bookings based on the backlog that we bring in from these acquisitions, but it's not overall significant. But let me just peel it back in terms of when you look underneath that 15.4, I’d say there's really kind of three things I’d point out. First was that there was really a good mix of all categories of our sales. As Julie mentioned, we had a record 20 clients, over $100 million of sales and that as you know positions us really well for the future. But if you go all the way down through the categories, all the way through our smaller deals, they’ve represented very well and that can help us with revenue in the current quarter. The second thing that I would point out is that our bookings were very broad based across all of our services, and that include strategy and consulting. And the third thing was that it was aligned to our strategic priorities as we pointed out, you know driven by cloud industry accent security for example. So you know with those points I'll hand it back to you to ask the second question or if there's any other color that you want. Lisa Ellis: Terrific! Thank you. The second one, maybe Julie this is for you. I just wanted – was hoping to comment on acquisitions. You know this is – obviously you’ve up-ticked acquisitions, made a couple of bigger ones than Accenture has historically done. Can you just talk about – you know is this just kind of opportunistic or has something kind of shifted in terms of your willingness to do larger acquisitions or specific market opportunities you're going after. Thank you. Julie Sweet: Surely. And well, so we've always said we have the capacity to do larger acquisitions, but we’re very disciplined about what we will acquire, and so these were you know opportunities that were very aligned to our strategic priorities. So you know Novetta being both, investment and public sector, but primarily all about you know advanced analytics, machine learning, cyber and cloud engineering, and also importantly diversification for our federal business, because they are in the national intelligence space and umlaut is in engineering, which was just an opportunity as a company that we know very well, that really is giving us an opportunity to accelerate our scale in Industry X and we've seen the digitization of manufacturing and engineering be a major priority post COVID. Now we've been investing for nearly a decade in this space. We predicted this would happen. As you can see by the number, the amount of work that we're already doing, and this was a great opportunity for a company that we know well, and you know our strategy continues to be – we're going to make acquisitions to scale and big market opportunities to add new skills and opportunities as you know that we built a lot of interactive through acquisitions, for example those renewed skills and capabilities, and then to deepen industry and functional knowledge. And so this is the continuation of that and you know I think the advantage we have is our financial capacity to make investments and to increase our investment you know for the benefit of our clients and all of our stakeholders when we see the right opportunities and we’re going to continue to have that disciplined around making strategic acquisitions. Lisa Ellis: Terrific! Good stuff. Thank you. Operator: Thank you. Our next question comes from the line of Ashwin Shirvaikar of Citi. Please go ahead. Ashwin Shirvaikar: Hey! Thanks and a great quarter. Congratulations on that from me as well. The question I had is about the momentum that you are seeing in the business and it seems to have actually accelerated from what you're seeing in the past quarters. I wanted to ask you with regards to whether this changes, how you think about managing the business in the interim, in order to continue to deliver, what you’re seeing from a demand perspective, particularly as we see attrition go up and so on and that's an across the board statement, not just an Accenture statement. So any thoughts with regards to how you're thinking of delivering? KC McClure: Yeah, Ashwin I’ll take this and maybe I'll frame up a few things for you and hand it over to Julie as well. So let me just maybe frame up how we’re thinking about you mentioned the demands you know in overall business and thinking about the quarter and our year-to-date from a financial perspective. You know these results are really exceptional when you think about it in the context of our historical performance, so I’ll start there. I mean clearly we’re benefiting from an easier compare in a strong market demand and we see that continuing, but even with that bookings at $44 billion growing 25% year-to-date and that’s off the base of record sales through Q3 last year. And then you couple that with 54 clients with bookings over $100 million through Q3, which is more in the first nine months of this year, than the whole of last year ‘20, FY‘20 and FY‘19 and I mention that as you talk about things in different ways, you may need to manage differently just to talk about the scale in our bookings. As we look at the scale in revenue, we grew record $2.3 billion in revenue this quarter year-over-year. When you think about our industries, where we’re clearly the leader with the breadth and depth of industries, with 11 of the 13 growing double digits and as I mentioned before in our guidance, the increase in our full year outlook, it's driven by organic revenue given that inorganic is contribution staying pretty much the same. And then you end that all with profitability of 40 basis points expansion this quarter. We had very strong profitability and we're no longer benefiting from a travel tailwind and we continue to invest at scale in our business and our people. So you know with that, let me hand it over more to Julie to round out some of the question you had on demand and attrition. Julie Sweet: Yes, so Ashwin it’s a great question around you know managing our business and so I want to just take you all back to right before the pandemic. I remember back then and on March 1 we put in a new growth model we call the nextgen growth model and that was designed for helping us manage our business as we saw the scale increasing, right, and that change in growth model was focused on being able to have more of our leaders closer to our clients, we changed the P&L as you recall to the geographic. And so we’ve already put in place a model that is designed to allow us to continue to scale, and so this for us was anticipated, and it’s exciting to see how we are very uniquely positioned as our clients’ needs have accelerated, because that’s what’s driving the demand right. The needs of our clients have accelerated post-COVID to do compressed transformation, and we have the right operating model in place. As we think about attrition, you now it’s ticked up to pre-COVID levels in a hot market although not the highest we’ve ever seen, and so as you said it’s an industry phenomenon, we are comfortable – I mean our core competency is about managing our supply and demand, but more importantly our core competency is being a great company to work for. And as you saw with our numbers this quarter, we hired net 32,000 incredible people and that is just a testimony to our ability to attract great talent, as well as continue to train our people. We’ve trained over 100,000 people since the pandemic declare started, pivoting to the areas of our clients’ needs. So we feel good about it, and of course this is what you expect from us, so we’ll continuously improve. Ashwin Shirvaikar: Thanks for that. All good points and I agree. I guess the next question it with regards to you know – and ordinary I don’t you know focus on a particular acquisition, but this Umlaut seems to be, I have to ask is this the first of many as you expand into a much bigger engineering services type presence. That is a relatively massive end market, so you know just strategically how are you thinking of this? Julie Sweet: Well the sort of big picture, we believe that the digital engineering and manufacturing space is the next frontier for our clients, right. There’s been a lot and there’s still a lot to do with respect to the front office and the back office for lack of a better term, that you know our clients are building a digital core, they’re transforming operations and they’re trying to find new ways of growth. But the areas that have been not as digitized over the last several years as companies have pivoted, has been in core operations, manufacturing and supply chain. Now we predicted this just as we predicted back in 2013, that someday everybody would be a digital business, and so we’ve been investing. We’ve already made, I don’t know, seven, eight, nine acquisitions over the last several years to build these capabilities, and you saw that with all the examples that we did in the script. And so this is about rapidly scaling with some of the best engineers in the world, right, because we see the market opportunity, but most importantly the need from our clients, and so you should expect that will continue to build these both organically and inorganically, but obviously this is a great add in terms of scale for us. Ashwin Shirvaikar: Great! Thank you. Congratulations! Operator: Thank you. Our next question comes from the line of Jason Kupferberg with Bank of America. Please go ahead. Jason Kupferberg : Thanks guys. Good morning. I’m wondering if you can estimate for us perhaps how much the acceleration in all this enterprise, digital transformation has enhanced your structural organic revenue growth profile, relative to pre-pandemic levels, because it certainly sounds like this trend continues to have lags. Julie Sweet: Yeah, I mean I think the way to think about it is that we’re taking market share and we are really well positioned to capture the growth that’s available because of the needs of our clients. And so you’re obviously seeing that uptick in organic growth and we think this will be sustained demand. I think it’s too early and we’re not going to kind of get back into sort of giving sort of a view of FY‘22, but what we would say is we do believe that what you’re seeing right now in demand isn’t just like you know a recovery because spending decreased, but actually sustained demand and that we are incredibly well positioned to capture that, because clients are looking for outcomes and the breadth of our services. You know they’re turning to us because we can give them solutions, not just individual services. They want the innovation that we’re bringing; you know the things like our SynOps platform. They are very appreciative and focused on the fact that we care about the 360 degree value, so that we’re helping improve their own skills, as well as achieving their goals and finally, you know and I think something that is really critical right now and why we are so well positioned is they see it’s a company that creates value and leads with values. And so trust really matters when you are doing major transformation and you know I’ll give you one example. We’ve had over 80 clients in the last 12 months just come and sit down with us to learn more about our diversity supplier program, because it really matters to them and they see us as a leader, right. These are the things that make us an incredibly attractive and trusted partner. And so we think that you know this is really an enduring differentiation at a time when there is going to be subsisting demand for compressed transformation. Jason Kupferberg : Okay, understood. Just a quick two part follow up here, your thoughts on Q4 book-to-bill and what were the areas of the business that surprised you most in terms of revenue this quarter, because obviously the overall upside was quite significant. Thank you. Julie Sweet: Yes, Jason just in terms of how we think about the fourth quarter. I mean so obviously we’ve had $44 billion of booking year-to-date and even with that, we still have a strong pipeline and we feel good about our position for Q4 as it relates to bookings. And in terms of what did better, you know as I mentioned earlier, it really was broad based, every part of our business did a bit better. Jason Kupferberg : Okay, thanks for the comments. Operator: Thank you. Our next question comes from the line of Rod Bourgeois with DeepDive. Please go ahead. Rod Bourgeois: Hey guys! Hey, I just wanted to ask about the margin outlook given the increased acquisition contribution that you’ll be digesting in fiscal ‘22. I just like to ask about the margin levers that you’ll be able to pull in order to still achieve overall operating margin expansion. And also, I guess besides digesting this added acquisition content, are you also needing to spend more on people costs given the war for talent that’s out there. So question about margin levers and also the investments in people? Thanks. KC McClure: Yes, thanks Rod. So I mean, let’s start with the second one first. So yes, in terms of for the people side of it, obviously there’s a lot of demand in the market. We’re in a hot market right now and historically we’ve seen wages increase and that vary by skills and geographies and that’s happening now, but you see that Rod flowing through our results already to-date and through our guidance. So it’s really up to us to manage our business with rigor discipline as we always do, you know us well, you know managing our pyramid, increasing the use of automation and just overall delivery efficiencies. So that’s the first part on wages as it relates to operating margin. And just coming back to the same point on V&A, so let me just give you a little bit more color on V&A coupled with what I talked about a little bit earlier and of course, I’m not going to give any specific guidance for FY ‘22 until September. But we do expect to have a higher level of inorganic contribution next year, probably around something closer to 4% and that’s really due to the fact that we’re deploying about $4 billion in FY ‘21, a larger portion that’s closer to the later part of the year, and we expect to benefit from more of that revenue in FY ‘22. We also expect at this time to deploy somewhere around $4 billion in FY ‘22, that’s including Umlaut, which we expect to close next year, early in the year. And of course as Julie said, we’ve always said we have the ability to do more, but that’s our line of sight today, and it’s up to us to manage our, to all the levers that we have in our disposal, to continue within the premise of clients and our overhead and structural costs, to make sure that we continue to drive modest margin expansion while investing at scale in our business and our people. Rod Bourgeois: Great! And then just a quick follow-up on the revenue progression that’s happening. Clearly, this is a big industry recovery, some of that cyclical, some of it secular, and you have certain COVID-impacted verticals that are coming back online. I guess as we head into the next fiscal year, are there on the other side, are there any revenue contributions that will taper as the COVID crisis ends? Are there any, is there any sort of lumpy work that might taper off as you head into the next fiscal year amidst all of the other momentum that’s happening in the business? Julie Sweet: I mean there is nothing material. I mean like think about the public sector for example. We did a lot of COVID surge work, but now you’ve got the fiscal stimulus that’s around the world and you see the digitization of the public sector like we gave the example of concept in Italy. So there is nothing material that we think will be difficult to manage, because you’re seeing really, when you see that in the results, kind of across industries, there this need to digitize, so nothing material that we think to mention. Rod Bourgeois: Thank you. Operator: Thank you. Our next question comes from the line of Bryan Bergin with Cowen. Please go ahead. Bryan Bergin: Good morning, thank you. I’m curious, over the last two to three quarters, have you seen a notable change in clients’ appetite for price increases as broader transformation demand is ramped up? KC McClure: Yes, so let me talk to you a little bit about what we’re seeing in terms of pricing overall. So just importantly, as a reminder, we talked about pricing. We define it as the contract profitability or margin on the work that we sell Bryan. And as always the environment remains competitive, and in many areas of our business we did see pricing was lower and that’s really based on a combination of the fact that the market is competitive and disciplined investments that we’re making, and so all of that is baked into our operating margin guidance for the year. Bryan Bergin: Okay. And then one on Accenture Operations, I’m curious if you’re seeing any change in the size and scope of engagements that clients are outsourcing too. Can you just comment on some of the strengths or the drivers of the continued strength that you’ve shown in that business? Julie Sweet: Yes, it’s a great question. It’s not so much about the size, it’s really about the intent. I mean what you’re seeing is clients really saying, in a world where I’ve got to digitize the entire enterprise, right, where do I want to focus my own resources and leadership and where can I leverage Accenture and their investments? And this is where we really got ahead of the market, right, where we developed SynOps and what we’re providing them is both cost efficiencies, but really outcomes of actual insights that come from being able to digitize. And then you add on top of that, where we have more clients thinking about having us takeover, we have a strong pipeline and you know taking over more people, because we have such a great employee value proposition and so they’re starting – you know when we think about the future of work, think about it, we’re seeing more of our clients really see it as a combination of their own employees automation or bots, and then partners like Accenture that really integrate with their own employees and we’re just a leader here. And so it’s more about the trends of the need to digitize that is what you’re seeing reflected, digitized at speed. Bryan Bergin: Thank you. Operator: Thank you. Our next question comes from the line of Bryan Keane with Deutsche Bank. Please go ahead. Bryan Keane: Hi guys, congrats on the results. I wanted to ask about Strategy Consulting. It had been a laggard, but saw that it moved positively into high single-digit. Just a little bit on the outlook there. Do you continue to see that maybe reach some of the demand you’re seeing in some of your other industry groups? KC McClure: Yes. Hey, Bryan. Thanks for the question. You’re right, we were very pleased with the acceleration to high single-digits in the quarter in strategy consulting, which is what we expected. In terms of how we look at just consulting overall type of work go forward, we see it being strong double-digit for the fourth quarter and the second half of the year that would mean we round up really kind of at a strong double-digit growth perspective. Julie Sweet: And Bryan as a reminder, because I remind you all every single quarter, right, clients aren’t focused on is it strategy and consulting or technology or operations. They are looking for outcomes and what makes us so unique is that all of these things, whether it’s Cloud or Intelligent Operations or marketing transformation bring together our services and with more confidence and certainty and that’s really how we think about it. Bryan Keane: Got it. And then just as a follow-up. The increase in M&A, just curious on how you guys are thinking about capital allocation, in particular the dividends and the share repurchase. Does that change at all with a little more M&A? KC McClure: Obviously, we’ll give you – I’ll give you specifics in September Bryan for next year, but overall our capital allocation framework really remains intact. Julie Sweet: I mean, you should all just think about this as we’re going to deliver on our commitments and we are investing to drive the next waves of growth and we are taking advantage of our ability to do so in this market. Bryan Keane: Great! Thanks so much. Angie Park : Last question. Operator, we have time for one more question, then Julie will wrap up the call. Operator: Thank you and that question will come from Tien-tsin Huang with JPMorgan. Please go ahead. Tien-tsin Huang: Hey! Thanks so much. Amazing results! Sorry if this was already asked, I had to jump off earlier. Just on the record number of deals over $100 million. I’m just curious how the pipeline is for such deals going forward. Is there an opportunity to replenish? Just what is the – what do you see out there in terms of large deal potential from here? KC McClure: Yes. Hey Tien-tsin, we still have a strong pipeline overall and that includes in the large deal category. Tien-tsin Huang: Okay, good. And then just on the four point inorganic contribution, I heard that for next year. How about on the margin impact there, I think KC you mentioned that there’ll be a little bit impact on the margin. You’ll still be able to expand. Just wanted to make sure I heard that correctly? Thanks. KC McClure: Yes. So yes, we want to – so what I did say is that we do expect inorganic contribution next year about 4% and our line of sight now is about $4 billion of capital spend next year ‘22, but we expect modest margin expansion to continue in ‘22. Tien-tsin Huang: Okay, very good. I appreciate that guys. Well done! KC McClure: Thank you. Julie Sweet: Great, Tien-tsin. Okay, in closing, we really appreciate everyone joining us today. We believe that we are unique because of both what we do and how we do it and we are a company that as I’ve shared before, creates value and leads with values. I want to thank all of our people and our leaders for what you’re doing every day. And finally, I want to thank all of our shareholders for your continued trust and support. We will make sure to earn it every day. Be well. Operator: Ladies and gentlemen, this conference will be available for replay after 10:00 AM Eastern today through September 23. You may access the AT&T replay system at any time by dialing 1-866-207-1041 and entering access code 1334620. International participants may dial 402-970-0847. Those numbers again are 1-866-207-1041 and 402-970-0847 with access code 1334620. That does conclude our conference for today. We thank you for your participation and for using AT&T Concerning Service. You may now disconnect.
Accenture Shares Jump 4% After Beating Q4 Estimates and Issuing Positive Outlook
Accenture (NYSE:ACN) shares surged over 4% in pre-market on Thursday following the company's release of better-than-expected fourth-quarter results and an optimistic outlook for fiscal 2025.
The consulting and outsourcing giant reported adjusted earnings per share of $2.79 for the quarter, slightly exceeding analyst expectations of $2.78. Revenue grew 3% year-over-year to $16.4 billion, surpassing the Street estimate of $16.35 billion.
Accenture's new bookings for the quarter totaled $20.1 billion, marking a 21% year-over-year increase, with $1 billion coming from generative AI projects. For fiscal 2024, the company achieved a record $81.2 billion in new bookings, reflecting a 13% annual increase.
Julie Sweet, Accenture’s chair and CEO, highlighted the company’s resilience and ability to adapt, emphasizing the success of their scalable and evolving business model.
Looking ahead, Accenture forecasts revenue growth of 3% to 6% in local currency for fiscal 2025 and anticipates full-year earnings per share between $12.55 and $12.91, representing 5% to 8% growth from 2024.
In addition, the company announced a 15% hike in its quarterly dividend to $1.48 per share and approved an extra $4 billion for its share repurchase program.
Accenture (NYSE:ACN) Quarterly Earnings Report Preview
- Earnings Per Share (EPS) estimate for Accenture is set at $2.77, indicating a year-over-year increase of 2.2%.
- Projected revenue for the quarter is approximately $16.38 billion, marking a 2.2% rise from the same quarter last year.
- Accenture has a history of exceeding the Zacks Consensus Estimate in three of the last four quarters, with an average surprise of 2.9%.
Accenture (NYSE:ACN) is gearing up to release its quarterly earnings report on Thursday, September 26, 2024, before the market opens. This announcement is highly anticipated by investors and analysts alike, as it provides a snapshot of the company's financial health and operational performance. Accenture, a global professional services company, offers a broad range of services and solutions in strategy, consulting, digital, technology, and operations. It operates in a competitive landscape, going head-to-head with other consulting giants such as Deloitte, PwC, and McKinsey & Company. The earnings per share (EPS) estimate set by Wall Street analysts for this quarter is $2.77, with projected revenue of approximately $16.38 billion.
The EPS estimate of $2.77 represents a year-over-year increase of 2.2%, indicating a positive growth trajectory for Accenture. This growth is further underscored by the expected revenue of $16.33 billion for the quarter, marking a 2.2% rise from the same quarter in the previous year. Such financial metrics are crucial for investors as they reflect the company's ability to grow its earnings and expand its operations amidst the competitive and ever-evolving global market.
Over the past 30 days, the consensus EPS estimate has been revised upwards by 0.6%, a testament to the analysts' growing confidence in Accenture's performance. This positive reassessment is likely influenced by the company's strategic initiatives and its ability to adapt to market demands, including the application of Generative AI (GenAI) for large-scale transformations. These technological advancements not only enhance Accenture's service offerings but also position it as a leader in innovation within the consulting industry.
Accenture's history of exceeding the Zacks Consensus Estimate in three of the last four quarters, with an average surprise of 2.9%, further bolsters expectations for a strong performance in the upcoming earnings report. Such a track record of earnings surprises plays a significant role in shaping investor expectations and can lead to positive stock price movements if the trend continues.
Given the company's solid financial indicators and the optimistic projections by analysts, there is a high probability that Accenture will beat earnings expectations for the fourth quarter. This potential outcome is supported by Accenture's strategic use of technology, its consistent growth in bookings, and its ability to deliver innovative solutions to its clients. As the earnings report date approaches, investors and market watchers will be keenly observing how Accenture's financial performance aligns with these expectations.
UBS Upgrades Accenture to Buy with $400 Target, Citing AI Growth Potential
UBS analysts upgraded Accenture (NYSE:ACN) to Buy from Neutral, setting a new price target of $400 on the stock.
The analysts highlighted the potential for multiple expansion as the market begins to anticipate accelerated revenue growth driven by AI opportunities. While there are concerns about the pace of IT spending, the analysts believe Accenture's shift towards cloud services, digital transformation, cybersecurity, and now Generative AI will support higher and more sustainable growth.
The analysts’ evaluation of Accenture's top 10 alliance partners indicates a positive trend for revenue acceleration over the next year. They noted that the current stock price does not fully reflect the potential of Generative AI, with Accenture already securing approximately $2 billion in GenAI bookings by Q3/24, compared to $300 million in the fiscal year ending August 2023.
Additionally, the analysts expect GenAI adoption to accelerate as clients recognize the value from initial experimentation, potentially scaling even faster than Accenture's cloud business, which grew from $1 billion in revenue in 2012 to $32 billion, representing about 50% of total revenue in 2023.
Accenture Quarterly Earnings Preview
- Wall Street anticipates an EPS of 3.14 and revenue estimates of $16.57 billion for Accenture's upcoming earnings report.
- Despite a forecasted slight year-over-year decline, the Managed Services segment is expected to see a 4.6% revenue increase.
- Accenture's valuation metrics, including a P/E ratio of approximately 25.54 and a P/S ratio of about 2.78, highlight its financial health and market position.
Accenture (NYSE:ACN) is gearing up for its quarterly earnings report on Thursday, June 20, 2024, before the market opens. With Wall Street setting its sights on an earnings per share (EPS) of 3.14 and revenue estimates hovering around $16.57 billion, the spotlight is on Accenture's financial performance. As a leading global professional services company, Accenture offers a broad range of services and solutions in strategy, consulting, digital, technology, and operations. It operates in a competitive landscape, going head-to-head with other consulting giants and technology service providers. The upcoming earnings report is crucial as it provides insights into the company's operational efficiency and market position.
Despite Accenture's impressive track record of surpassing earnings expectations in the past four quarters, with an average beat of 4.9%, the current forecast suggests a tempered outlook. Analysts predict a slight year-over-year decline in both revenues and earnings for the third quarter of fiscal 2024. The anticipated revenue is pegged at $16.5 billion, a marginal decrease from the previous year, attributed to reduced spending in key sectors such as software and platforms, communications, media, and banking. This scenario underscores the challenges Accenture faces amidst shifting market dynamics and client spending behaviors.
However, not all is bleak for Accenture. The Managed Services segment is expected to shine, with revenues projected to hit $8.2 billion, marking a 4.6% increase from the previous year. This growth is partly fueled by the effective deployment of Accenture's SynOps platform, highlighting the company's ability to innovate and adapt to changing market needs. Such performance in the Managed Services segment could offset the downturns in other areas, underscoring the importance of diversification in Accenture's business model.
The financial community closely watches earnings revisions, as they can significantly impact a stock's short-term movements. In Accenture's case, analysts have revised their consensus EPS estimate downward by 0.6% over the last 30 days. This adjustment reflects a cautious stance on the company's financial outlook for the quarter ended May 2024. Historical trends suggest that the direction of earnings estimate revisions can influence stock performance leading up to the earnings announcement, making it a critical factor for investors to monitor.
Accenture's valuation metrics, such as the price-to-earnings (P/E) ratio of approximately 25.54 and the price-to-sales (P/S) ratio of about 2.78, offer insights into how investors view the company's earnings potential and overall value. These ratios, along with the enterprise value to sales (EV/Sales) and the enterprise value to operating cash flow (EV/OCF), provide a comprehensive picture of Accenture's financial health and market position. With a low debt-to-equity (D/E) ratio and a solid current ratio, Accenture demonstrates financial stability and resilience, key attributes that investors consider when assessing the company's long-term growth prospects.
Accenture Drops 6% on Guidance Cut
Accenture (NYSE:ACN) experienced a 6% drop in its stock price intra-day today after the company adjusted its revenue growth expectations for the fiscal year 2024 downward. In its Q2, Accenture reported an earnings per share of $2.77, which was higher than the anticipated $2.66 by analysts. However, its revenue of $15.8 billion was just shy of the $15.84 billion forecast.
For the upcoming Q3, Accenture projects its revenues to range between $16.25 billion and $16.85 billion.
For the fiscal year 2024, Accenture has revised its expected revenue growth to between 1% and 3% in local currency, down from the earlier projection of 2% to 5%.
Accenture Plunges 5% After Q4 Earnings Report
Accenture (NYSE:ACN) shares dropped more than 5% intra-day today after the company released its Q4 results and provided guidance for its full fiscal year.
The company reported an EPS of $2.71, surpassing the Street estimate of $2.66. However, the revenue for the quarter came in slightly below expectations at $15.99 billion, compared to the Street estimate of $16.07 billion.
Looking forward, Accenture offered guidance for 2024, projecting an EPS range of $11.97 to $12.32. This is slightly lower than the Street forecast of $12.46. Additionally, for fiscal year 2024, Accenture anticipates revenue growth in the range of 2% to 5%.
For the first quarter of fiscal 2024, the company expects revenues to fall within the range of $15.85 billion to $16.45 billion.
Accenture Reports Better Than Expected Q3 Earnings
Accenture (NYSE:ACN) reported its Q3 earnings results yesterday, with EPS of $3.19 coming in better than the Street estimate of $3.01. Revenue was $16.6 billion, beating the Street estimate of $16.49 billion.
Management noted continued pressure on revenue and bookings from smaller deals, especially in Strategy & Consulting, systems integration work and Communications, Media & Technology. New bookings increased 2% year-over-year on a reported basis, and increased 4% in local currency to $22.1B in Q3 for a book-to-bill ratio of 1x.
For Q4/23, the company expects revenue to be in the range of $15.75-$16.35 billion, compared to the Street estimate of $16.35 billion. For the full year, the company sees EPS in the range of $11.52-$11.63, compared to the Street estimate of $11.60.
