Accenture's (
ACN
) average hourly bill rate for its management consultants has been
declining since 2008 as tougher economic times have caused clients
to lower bill rates as well as reduce discretionary spending,
including spending on consultancy projects. Accenture competes in
the management consulting space with the likes of The Boston
Consulting Group, Capgemini, Bain & Company, McKinsey, IBM (
IBM
), HP (
HPQ
) and Deloitte Consulting.
We expect Accenture's bill rates for its management consultants
will remain subdued in the near future. Accenture, which claims
that it is ranked in top 5 consulting companies globally, has
expertise in various areas of consulting - strategic consulting,
M&A, supply chain management, etc. In the longer term, as the
clients' budgets expand with improving economy, we expect
Accenture's to benefit resulting in higher consultant bill
rates.
While we expect Accenture's hourly bill rate for its management
consultant will gradually improve to $220 by the end of Trefis
forecast period, Trefis members predict the bill rate will rise
further to almost $250, to ACN stock
We currently have a
Trefis price estimate of $52.22 for Accenture's
stock
, about 1% below the current market price of $52.52.
Firms Cut on Discretionary Spending During
Recession
Firms hire consultants for their expert advice on improving
their business. Consultancy is not a necessary expenditure but a
discretionary spend, which can be cut back immediately if a firm
has to cut costs. Due to the economic crisis, several firms are
deferring decisions on new work, and extensions in current projects
are not coming through at historical rates. Some clients also do
not have their annual budgets approved, which causes uncertainty
for consulting companies like Accenture.
Expertise in Consulting will Help Accenture Bounce
Back
Accenture claims that its management consulting business
features in top 5 consulting firms along with those like McKinsey,
The Boston Consulting Group, and Bain & Company in terms of
expertise. Accenture offers consulting in various areas of
management consulting: strategic consulting, M&A, supply chain
management, and optimization of processes for operations, finance
and HR divisions of companies. With wide presence and offerings in
consulting business and a proven track record, we believe Accenture
will realize higher bill rates as the economy improves and as
companies start expanding their budgets.
Trefis Community Forecast
Trefis members forecast Accenture's hourly bill rate for
consultants will increase from $196 in 2010 to $246 by the end of
the Trefis forecast period, compared to the baseline Trefis
estimate of an increase from about $180 to $220 during the same
period. The member estimates imply an upside almost 5% upside to
the Trefis price estimate for Accenture's stock.
Our
complete analysis for Accenture's stock.