Markets

Accenture (ACN) Q4 Earnings & Revenues Beat, View Tepid

Accenture plcACN reported fourth-quarter fiscal 2015 earnings per share of $1.15, which beat the Zacks Consensus Estimate of $1.11 per share. Also, on a year-over-year basis, earnings increased 6.5% from $1.08 per share. The year-over-year increase was primarily due to higher operating income, higher revenue base and lower share count.

Revenues and Bookings

Accenture's fourth-quarter net revenue not only increased 1.4% year over year to $7.889 billion but also surpassed the Zacks Consensus Estimate of $7.648 billion. Net revenue also came ahead of management's guided range of $7.45 to $7.70 billion, primarily aided by a 4% increase in Consulting revenues ($4.2 billion), which more than offset a 1% decline in Outsourcing revenues ($3.7 billion).

Among the operating segments, Communications, Media & Technology revenues were up 4% on a year-over-year basis to $1.64 billion. Revenues from Health & Public Services and Financial Services increased 7% and 1% year over year to $1.39 billion and $1.69 billion, respectively. Revenues from Products were flat on a year-over-year basis and came in at $1.93 billion. Resources, however, decreased 5% on a year-over-year basis to reach $1.23 billion during the quarter.

Geographically, revenues from the North Americas increased 10% on a year-over-year basis, while revenues from Europe and Growth Markets (Asia Pacific, Latin America, Africa, the Middle East, Russia and Turkey) were down 4% and 7%, respectively, from the year-ago quarter.

Accenture reported new bookings of $8.8 billion during the quarter, which were negatively impacted by foreign currency fluctuations. Consulting bookings and Outsourcing bookings for the quarter amounted to $4.1 billion and $4.7 billion, respectively.

Operating Results

Fourth-quarter gross margin was flat on a year-over-year basis and came in at 31.7%, primarily due to a higher revenue base, which was offset by higher cost of services.

Operating expenses increased 1.6% from the year-ago quarter to $1.41 million, primarily due to higher selling, general and administrative (SG&A) expenses. As a percentage of net revenue, operating expenses were flat on a year-over-year basis and came in at 17.9%.

Accenture's operating income came in at $1.09 billion or 13.9% of net revenue compared with $1.08 billion or 13.9% of revenues reported in the year-ago quarter. Accenture reported $778.6 million in net income or $1.15 per share.

Balance Sheet & Cash Flow

Accenture exited the quarter with total cash balance of $4.36 billion compared with $4.03 billion in the preceding quarter. Accenture's long-term debt balance at the end of the fourth quarter was $25.6 million.

Operating cash flow was $1.50 billion in the reported quarter while free cash flow was $1.4 billion.

Share Repurchase and Dividend

In line with its policy of returning cash to shareholders, Accenture repurchased 6.6 million shares for $664 million during the fourth quarter. Also, during the quarter, the company approved approximately $5 billion of additional share repurchase activity. The company increased its semi-annual cash dividend by 8% of $1.10 per share during the quarter.

Guidance

For the first quarter of fiscal 2016, Accenture expects net revenue between $7.70 billion and $7.95 billion. The Zacks Consensus Estimate is pegged at $8.08 billion. The company did not provide any earnings per share guidance.

Accenture provided guidance for fiscal 2016. The company expects net revenue to grow in the range of 5% to 8% in local currency. Accenture expects earnings per share in the range of $5.09-$5.24 (mid-point $5.17 per share). The Zacks Consensus Estimate is pegged at $5.21 per share.

For fiscal 2016, the company's operating margin is projected in the range of 14.6% to 14.8%. Operating cash flow is expected in the range of $4.1 billion to $4.4 billion, while free cash flow is likely to be within $3.6 billion to $3.9 billion.

Our Take

Accenture delivered better-than-expected fourth-quarter fiscal 2015 results. Moreover, revenues increased on a year-over-year basis, reflecting increased focus on the Consulting business, new bookings and continuous return of shareholders' value. However, the company provided tepid first quarter fiscal 2016 revenue guidance.

Accenture's solid performance across insurance, banking and health care segments reflects strong demand for its services, which boost its long-term growth prospects. However, increasing competition from Cognizant Technology Solutions CTSH and International Business Machines Corporation IBM , a strained spending environment and Accenture's broad European exposure may temper its growth to some extent.

Accenture has a Zacks Rank #3 (Hold). Investors may consider Amazon.com Inc. AMZN , which sports a Zacks Rank #1 (Strong Buy).

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days.Click to get this free report >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

ACCENTURE PLC (ACN): Free Stock Analysis Report

AMAZON.COM INC (AMZN): Free Stock Analysis Report

INTL BUS MACH (IBM): Free Stock Analysis Report

COGNIZANT TECH (CTSH): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story

AMZN CTSH IBM ACN

Other Topics

Earnings Stocks

Latest Markets Videos

    Zacks

    Zacks is the leading investment research firm focusing on stock research, analysis and recommendations. In 1978, our founder discovered the power of earnings estimate revisions to enable profitable investment decisions. Today, that discovery is still the heart of the Zacks Rank. A wealth of resources for individual investors is available at www.zacks.com.

    Learn More