) reported first quarter fiscal 2013 earnings per share (EPS) of
$1.06, beating the Zacks Consensus Estimate of $1.04. Earnings
increased 9.8% from the year-ago quarter attributable to higher
revenues and margins and lower share count and tax rate,
partially offset by lower non-operating income as well as
foreign-exchange headwinds. Despite the beat, shares dropped
5.45% in the after-hours citing concerns around Euro issues
(affecting lower spending for consulting services) and weak
Accenture reported first quarter net revenue of $7.22 billion
(including a 3.0% negative foreign exchange impact), up 2.1% from
$7.07 billion in the year-ago quarter. Net revenue was roughly in
line with the midpoint of the company's guided range of $7.10
billion to $7.35 billion but was lower than the Zacks Consensus
Estimate of $7.28 billion. Revenue growth moderated due to weak
segment performances and Euro issues.
Among the operating segments, Health & Public Services
generated double-digit revenue growth, which was supported by
moderate single-digit growth in Financial Services. Product and
Resources revenues grew 2.0% from the year-ago level.
Communications, Media & Technology registered a 5.0% decline.
Revenues from Resources and Other revenues were roughly flat.
Consulting revenue dropped 3.0% year over year to $3.96
billion, while registering a decent sequential growth. However,
Outsourcing revenues increased 9.0% from the year-ago quarter to
Geographically, year-over-year increases of 8.0% and 7.0% were
seen in top-line contributions from the Americas and the Asia
Pacific, respectively. Accenture's performance in the Europe, the
Middle East and Africa (EMEA) region amidst the prevailing debt
concern lacked luster, with a fall of 6.0% year over year.
Total new bookings for the first quarter were $7.5 billion,
reflecting a negative 2.0% foreign-currency impact. Consulting
bookings were $4.2 billion and outsourcing bookings were $3.3
First quarter gross margin increased 100 basis points (bps)
year over year to 32.8%. Gross margin expansion was supported by
higher utilization rate and lower attrition rate.
Total operating expenses increased 3.7% year over year due to
an increase of 3.7% in sales and marketing expenses and 3.8% in
general and administrative expenses. Operating margin was 14.5%,
up 60 bps year over year.
Accenture reported net income of $757.8 million or $1.06 a
share, up from $704.0 million or 96 cents in the year-ago
quarter. One-time items in the quarter were insignificant. The
effective tax rate was 26.8% as against 28.3% in the year-ago
Balance Sheet & Cash Flow
Operating cash usage was $108.8 million in the reported
quarter compared with operating cash flow of $1.71 billion in the
prior quarter. Net property and equipment additions were $86.5
million, down from $115.3 million in the prior quarter. Total
cash balance decreased to $5.68 billion from $6.64 billion in the
preceding quarter. Accenture carries no significant long-term
Share Repurchase and Dividend
During the first quarter, Accenture repurchased 3.3 million of
its common outstanding shares for a total value of $220.8
million. The activity includes 656,000 shares repurchased in the
open market. As of November 30, 2012, Accenture had roughly 693
million shares worth $4.05 billion outstanding under the current
Accenture also paid a semi-annual cash dividend of 81 cents
per share in the reported quarter amounting to $560.1
For the second quarter of fiscal 2013, Accenture expects net
revenue in the range of $6.9 billion to $7.15 billion, reflecting
a sequential decline. This figure was arrived at after
considering a 1.0% negative foreign-exchange impact. The company
did not provide any second quarter update on EPS, but the Zacks
Consensus Estimate is pegged at 97 cents.
For full fiscal 2013, management continues to expect net
revenue growth 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
14.1% to 14.2% (slightly up from previously guided 14.0%-14.1%)
and annual tax rate between 26.0% and 27.0%. Diluted EPS
expectation is between $4.24 and $4.32, up from previously guided
range of $4.22 and $4.30. However, the Zacks Consensus Estimate
of $4.27 is slightly lower than the midpoint of company's
We find Accenture's first quarter results a mixed bag with the
bottom line beating the Zacks Consensus Estimate and top line
missing 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
International Business Machines Corp.
), a strained spending environment and Accenture's broad European
exposure (roughly 40.0%) may temper its growth prospects to some
Currently, Accenture has a Zacks #3 Rank (Hold).
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