Accenture Plc. ( ACN ) is set to report first-quarter fiscal 2015 results on Dec 18. Last quarter, the company posted a negative earnings surprise of 1.82%. Let's see how things are shaping up for this announcement.
Growth Factors This Past Quarter
Accenture delivered better-than-expected fourth-quarter results. Revenues also increased on a year-over-year basis, reflecting an increased focus on the Outsourcing business, new bookings and continuous return of shareholders value. Another encouraging factor was the revenue increase in its Consulting business. However, the company provided tepid first-quarter revenue guidance.
Recently, Accenture announced that it has entered into an agreement to acquire Australian digital services provider, Reactive Media Pty Ltd. The move is part of Accenture's efforts to bolster its digital marketing capabilities.
Also, Accenture inked a deal with the world's largest software maker, Microsoft Corp. ( MSFT ), to expand the global footprint of their joint venture - Avanade Inc. (a Microsoft solution provider). The alliance will enhance user satisfaction and eventually expand Accenture's customer base.
This apart, Accenture also announced that it has formed a strategic alliance with leading customer experience management technology solutions provider, Backbase. The alliance will help banks in improving customer engagement through digital platforms.
We believe that Accenture's deal wins across different sectors, especially insurance, during the quarter reflects strong demand for its services. Strategic alliances are also expected to boost Accenture's growth prospects.
We believe that Accenture's solid performance across insurance, banking and health care segments reflects strong demand for its services and solid long-term growth prospects. However, increasing competition from Cognizant Technology Solutions ( CTSH ) and IBM ( IBM ), a cautious spending environment and Accenture's broad European exposure may temper its prospects to some extent.
Our proven model does not conclusively show that Accenture will beat earnings estimates this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here as you will see below.
Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate ($1.20 per share) and the Zacks Consensus Estimate ($1.19 per share), stands at +0.84%.
Zacks Rank: Accenture carries a Zacks Rank #4 (Sell). We caution against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Other Stocks to Consider
Here are some other companies, which you may consider as our model shows that they have the right combination of elements to post an earnings beat this quarter:
FedEx Corp. ( FDX ) has an Earnings ESP of +4.13% and a Zacks Rank #2 (Buy)
Red Hat, Inc. ( RHT ) has an Earnings ESP of +3.70% and a Zacks Rank #3 (Hold)