) reported first-quarter fiscal 2014 earnings per share of $1.15,
beating the Zacks Consensus Estimate of $1.09. Earnings increased
8.6% from the year-ago quarter attributable to higher revenues,
operating income, lower share count and favorable tax rate.
Revenues and Bookings
Accenture's first-quarter net revenues increased 1.9% on a
year-over-year basis to $7.36 billion and came ahead of the Zacks
Consensus Estimate of $7.23 billion. Net revenue also was at the
high end of management's guided range of $7.0 billion to $7.3
billion, primarily aided by higher-than-expected Outsourcing
revenues (up 5.0% on a year-over-year basis to $3.42 billion),
which more than offset Accenture's Consulting revenues, down 1%
year over year to $3.94 billion.
Among the operating segments, Health & Public Services
revenues increased 5.0% from the year-ago quarter to $1.23
billion while revenues from Financial Services were up 2.0% from
the year-ago quarter to $1.60 billion.
Accenture's revenues from Products of $1.80 billion increased
6.0% while revenues from Resources remained flat on a
year-over-year basis at $1.32 billion. Communications, Media
& Technology revenues were down 3.0% on a year-over-year
basis to $1.41 billion.
Geographically, revenues from the Americas, and Europe, the
Middle East and Africa (EMEA) increased 3.0% and 3.0%,
respectively, on a year-over-year basis, while revenues from the
Asia-Pacific region recorded a decline of 6.0% from the year-ago
Accenture reported new bookings of $8.7 billion during the
quarter. Consulting bookings and Outsourcing bookings for the
quarter were $4.3 billion and $4.4 billion, respectively.
First-quarter gross margins increased 50 basis points (bps)
from the year-ago quarter to 33.3%, primarily due to higher
Operating expenses increased 3.1% from the year-ago quarter
due to a 6.9% increase in sales and marketing expenses. The
company accounted reorganization benefits of $18.1 million.
As a percentage of net revenue, operating expenses expanded
30 bps to 18.5% from the year-ago quarter.
Accenture's operating income increased 4.0% from the year-ago
quarter to $1.09 billion, while margins expanded 30 bps to 14.8%.
Accenture reported net income of $800.9 million or $1.15 per
share which increased from $757.8 million or $1.06 per share.
Balance Sheet & Cash Flow
Accenture exited the quarter with total cash balance of $4.53
billion versus $5.63 billion in the preceding quarter.
Accenture's long-term debt balance at the end of the first
quarter was $25.9 million.
Operating cash flow was $181 million in the reported quarter
compared with $1.50 billion in the prior quarter while free cash
flow for the quarter was $122.0 million.
Share Repurchase and Dividend
Consistent with Accenture's policy of returning cash to its
shareholders, the company repurchased 9.7 million shares for a
total value of $722.0 million during the first quarter. The
activity included 8 million shares repurchased in the open
market. Accenture paid dividends worth $630.0 million.
For the second quarter of 2014, Accenture expects net revenues
between $6.95 billion and $7.25 billion. The company did not
provide any update on fourth-quarter earnings per share.
The company modified its guidance for fiscal 2014. Although,
Accenture expects net revenue to grow in the range of 2.0% to
6.0% in local currency, the company has upped its earnings per
share outlook from the range of $4.42-$4.54 to $4.44-$4.56. The
company expects new bookings in the range of $32 billion-$35
During fiscal 2014, the company expects its operating margins
to range between 14.3% and 14.5%. In fiscal 2014, the company
expects operating cash flow in the range of $3.6 billion-$3.9
billion while free cash flow in the range of $3.2 billion-$3.5
Accenture's first-quarter results reflect its increasing focus
on the Outsourcing business, operating cost optimization, new
bookings and continuous return of shareholders' value. However,
its consulting business was a bit of a disappointment.
Improved bookings growth and solid performance across
insurance, banking and healthcare segments reflects strong demand
for Accenture's services, boosting long-term growth prospects.
However, increasing competition from
Cognizant Technology Solutions
), a strained spending environment and Accenture's broad European
exposure may temper its growth prospects to some extent.
Currently, Accenture has a Zacks Rank #3 (Hold). Investors may
), which carries a Zacks Rank #1 (Strong Buy).
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