We expect Accenture plcACN to beat expectations when it reports third-quarter fiscal 2016 results on Jun 23.
Why a Likely Positive Surprise?
Our proven model shows that Accenture is likely to beat earnings because it has the right combination of two key ingredients.
Positive Zacks ESP: Expected Surprise Prediction or Earnings ESP , which represents the difference between the Most Accurate estimate ($1.41 per share) and the Zacks Consensus Estimate ($1.40 per share), stands at +0.71%. This is very meaningful and a leading indicator of a likely positive earnings surprise for shares.
Zacks Rank #2 (Buy): Note that stocks with a Zacks Rank of #1, 2 and 3 have a significantly higher chance of beating earnings. The sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement.
The combination of Accenture's Zacks Rank #2 and +0.71% ESP makes us confident in looking for an earnings beat.
What is Driving the Better-Than-Expected Earnings?
We are positive about Accenture's latest product additions in the analytics application space, given the increasing demand for digital solutions. We also expect Accenture's investment in digital and marketing capabilities to boost long-term growth. This will also help the company in effectively competing with other digital marketing service providers such as International Business Machines Corp. IBM , Dell and Deloitte.
Furthermore, Accenture's strategy of growing through acquisitions is encouraging. Going forward, Accenture's solid performance across insurance, banking and health care segments reflects strong demand for its services, which will boost its long-term growth prospects.
Most recently, GE Healthcare, a division of General Electric Company GE , introduced a new offering in collaboration with Accenture to help improve medical claims processing and related cash flow for healthcare providers. The collaboration is likely to improve the revenues of Accenture in the long run.
Moreover, it is noteworthy that Accenture has surpassed the Zacks Consensus Estimate in the last three out of the four quarters with an average positive surprise of 5.6%.
Another Stock to Consider
Here is another company you may want to consider as our model shows that it has the right combination of elements to post an earnings beat in its upcoming release:
DBV Technologies S.A. DBVT , Earnings ESP of +12.68% and a Zacks Rank #3 (Hold)