Accenture plc
(
ACN
) reported fourth quarter fiscal 2012 earnings per share (EPS) of
88 cents, in line with the Zacks Consensus Estimate. Earnings
decreased 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 revenues and margins and lower share
count.
Revenues
Accenture reported fourth quarter net revenue of $6.84 billion
(including a 7.0% negative foreign exchange impact), up 2.2% from
$6.69 billion in the year-ago quarter. Net revenue was roughly in
line with the higher end of the company's guided range of $6.6
billion to $6.85 billion and higher than the Zacks Consensus
Estimate of $6.74 billion. Revenue growth moderated due to weak
segment performances and Euro issues.
Among the operating segments,
Financial Services
generated high single-digit revenue growth, which was supported by
moderate single-digit growth in
Health & Public Services
.
Product
and
Resources
revenues were roughly in line with the year-ago level.
Communications, Media & Technology
registered a 3.0% decline. There was negligible growth in
Other
revenues.
Consulting
revenue dropped 4.0% to $3.74 billion. However,
Outsourcing
revenues increased 10.0% from the year-ago quarter to $3.10
billion.
Geographically, year-over-year increases of 5.0% and 11.0% were
seen in top-line contributions from the
Americas
and the
Asia Pacific
, respectively. Accenture's performance in the
EMEA
region amidst the prevailing debt concern lacked luster, with a
fall of 4.0% year over year.
Bookings
Total new bookings for the fourth quarter were $9.2 billion,
reflecting a negative 9.0% foreign-currency impact. Consulting
bookings were $4.3 billion and outsourcing bookings were $4.9
billion.
Operating Results
Fourth quarter gross margin dropped 20 basis points year over
year to 32.9%. Utilization rate remained unchanged at 87.0%. The
decrease in gross margin was due to higher subcontractor costs,
recruitment and training costs as well as an increase in annual
compensation. The attrition rate fell to 12.0% from 14.0% in the
year-ago quarter.
Total operating expenses increased 1.2% year over year due to an
increase of 2.2% in sales and marketing expenses and decrease of
0.6% in general and administrative expenses. Operating margin was
13.8%, flat year over year.
Accenture reported net income of $630.1 million or 88 cents a
share, down from $672.2 million or 91 cents in the year-ago
quarter. One-time items in the quarter were insignificant. The
effective tax rate was 32.8% as against 27.0% in the year-ago
quarter. The higher tax rate was primarily due to a net increase in
reserves and a change in the geographic mix of income.
Balance Sheet & Cash Flow
Operating cash flow was $1.71 billion in the reported quarter
compared with $1.22 billion in the prior quarter. Net property and
equipment additions were $115.3 million, up from $90.5 million in
the prior quarter. Total cash balance increased to $6.6 billion
from $5.6 billion in the preceding quarter. Accenture carries no
long-term debt burden.
Share Repurchase and Dividend
During the fourth quarter, Accenture repurchased 12.0 million of
its common outstanding shares for a total value of $696.0 million.
The activity includes 10.4 million shares repurchased in the open
market. As of August 31, 2012, Accenture had roughly 697 million
shares worth $4.2 billion outstanding under the current
authorization.
Accenture also paid a semi-annual cash dividend of 81 cents per
share in the reported quarter. The dividend payout rate is 20.0%
higher than the prior payout.
Guidance
For the first quarter of fiscal 2013, Accenture expects net
revenue in the range of $7.1 billion to $7.35 billion, reflecting a
solid sequential comparison. This figure was arrived at after
considering a 3.0% negative foreign-exchange impact. The company
did not provide any first quarter update on EPS, but the Zacks
Consensus Estimate is pegged at $1.01.
For full 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 annual
tax rate between 26.0% and 27.0%. Diluted EPS expectation is
between $4.22 and $4.30. However, the Zacks Consensus Estimate of
$3.83 is much lower than the company's guidance range.
Accenture also forecasts operating cash flow in the range of
$3.2-$3.5 billion; property and equipment additions of roughly
$420.0 million; and free cash flow in the range of $2.8 billion to
$3.1 billion.
Accenture's fiscal year outlook assumes a foreign-exchange
impact of negative 1.0%.
Recommendation
We find Accenture's fourth quarter results a mixed bag with the
top line beating the Zacks Consensus Estimate and bottom line
matching the same. Growing focus on outsourcing business, operating
cost optimization, new booking growth and continuous return of
shareholder value were the quarter's positives. Though weak
consulting business could be a reason for concern, management seems
confident that growth in outsourcing will mitigate the loss. Also,
management's commentary at the conference call to continue
investing in priority industries (such as Communications), emerging
markets, and geographical expansion as well as to boost its brand
value could act as a catalyst for the stock.
We are encouraged by the steady flow of new business and believe
that the trend will continue. However, increasing competition from
International Business Machines Corp.
(
IBM
), a strained spending environment and Accenture's broad European
exposure (roughly 40.0%) may temper its growth prospects to some
extent.
Currently, Accenture has a short-term "Hold" rating, denoted by
the Zacks #3 Rank.
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