Accenture plc
(
ACN
) is scheduled to announce its third quarter fiscal 2012 results
after the market closes on June 28, 2012. We notice some downward
movement in estimates, which is surprising considering Accenture's
growth prospects.
Second Quarter Overview
Accenture delivered decent second quarter results, beating the
Zacks Consensus Estimate by 11 cents on the bottom line. The
quarter's earnings came in at 97 cents per share, up 28.8% from the
year-ago quarter. The outperformance was attributable to higher
revenues and margins, a lower share count and tax rate, as well as
favorable foreign-exchange rates.
The company's reported revenue increased 12.3% year over year to
$6.8 billion, driven by healthy performance across all segments and
strong demand for its offerings across served industries.
Geographical contributions were also encouraging.
Despite higher revenue, gross margin fell short of the year-ago
figure due to higher subcontractor costs, recruiting and training
costs, as well as an increase in annual compensation. But operating
cost-control measures led to an operating margin expansion of 40
basis points.
Guidance
For the fourth quarter of fiscal 2012, Accenture expects net
revenue in the range of $7.05 billion to $7.25 billion, reflecting
a modest sequential comparison. This figure was arrived at after
considering a 3% negative foreign-exchange impact.
Steady bookings growth, continuous deal wins and the company's
resilience against the macroeconomic backdrop led to a hike in
fiscal 2012 guidance. Net revenue growth is projected in the range
of 10.0% to 12.0%, up from the previous expectation of 7.0% to
10.0%. Diluted earnings per share expected were between $3.82 and
$3.90, higher than the preciously expected range of
$3.76-$3.84.
For the full story on the earnings release, please look at:
Accenture Beats, Ups Fiscal Outlook
.
Agreement of Analysts
The analysts are of opinion that Accenture's
consulting/outsourcing/offshore combination continues to support
global enterprise clients' 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, mobility,
digital marketing, analytics, among others.
Some analysts think further margin expansion is possible over
time, particularly given the company's Global Delivery Network
expansion over the past few years.
But the analysts are concerned about the growing foreign
exchange headwinds that can have a negative impact on its revenue
as most of the company's revenue comes from outside America.
Despite Accenture's resilient performance in the past, analysts
think that the ongoing difficult economic conditions in Europe
could affect Accenture's revenues moving into fiscal 2013.
Out of the 18 and 21 estimates for the third quarter and fiscal
2012, 1 and 7 estimates, respectively, have moved downward in the
last 30 days. Also, among the 21 estimates for fiscal 2013, 7 fell
in the past 30 days.
We believe that the downward revisions reflect the European debt
concern that could affect Accenture's business growth in the
region.
Magnitude of Estimate Revisions
The Zacks Consensus Estimate for the third quarter was unaltered
at 99 cents. But the movements in estimates for fiscal 2012 were
somewhat negative because of the downward revision to estimates. In
the past 30 days, the Zacks Consensus Estimate for fiscal 2012
moved down by a penny to $3.86. The Zacks Consensus Estimate for
fiscal 2013 also decreased 5 cents to $4.23 in the past 30
days.
Recommendation
We see Accenture's promise (in its last earnings conference
call) to continue investing in priority industries (such as
Communications) and emerging markets as well as boost its brand
value, as encouraging. Management also seems confident of its
increased fiscal 2012 guidance.
But competitive pressure from
IBM
Corp.
(
IBM
) and Deloitte Consulting LLP, a strained spending environment and
Accenture's European exposure compel our short-term bearish view on
the stock.
Currently, Accenture has a Zacks #4 Rank, implying a short-term
Sell recommendation.
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