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Accenture Posts Mixed Quarterly Results; Analysts See Upside Potential

Story Highlights

Accenture reported strong third-quarter bookings, aiding revenue growth. Analysts see upside potential, while hedge funds remain optimistic about the stock.

Ireland-based Accenture (NYSE: ACN) is a global professional services company. It offers management consulting, technology, and outsourcing services and generates revenue through various industries. 

Reflecting stable returns over the past year, the company has turned triumphant amid the broader market uncertainty. Accenture succeeded in winning business from large corporations based on its good recognition and strong market presence. Also, its huge size provides substantial economies of scale. 

Recently, the consulting company posted mixed results for the third quarter of Fiscal 2022 (ended May 31).

Results in Detail 

Accenture reported third-quarter EPS of $2.79, missing analysts’ expectations of $2.86. The company recorded earnings of $2.40 in the same quarter last year. 

Meanwhile, total revenues of $16.2 billion advanced 22% from the year-ago period and beat the consensus estimate of $16.04 billion, driven by the rise in demand across services, markets, and industries.  

Consulting revenue was $9.03 billion, up 24%, while outsourcing revenue grew 19% to $7.13 billion. 

Operating income came in at $2.6 billion, up 23% year-over-year, while an operating margin of 16.1% expanded by 10 basis points. 

Accenture recorded new bookings of $17 billion, up 10% year-over-year. Interestingly, this was the company’s second-highest ever record bookings. 

Capital Deployment 

Concurrent with the earnings release, Accenture announced a 10% increase in its quarterly cash dividend to $0.97 per share. The new dividend will be paid on August 15 to shareholders of record as of July 14, 2022. 

During the reported quarter, Accenture repurchased 3.1 million shares for a total of $972 million. As of May 31, 2022, the total remaining share repurchase authorization stood at $3.7 billion. 

Guidance 

Including the unfavorable impact of foreign exchange, for Fiscal Q4 2022, Accenture expects revenues in the range of $15 billion to $15.5 billion, representing year-over-year growth of 20% to 24%. The consensus estimate is pegged at $15.85 billion. 

Additionally, for Fiscal 2022, revenue growth is forecast in the range of 25.5% to 26.5%, up from the prior range of 24% to 26%. The operating margin is anticipated to be 15.2%, up 10 basis points year-over-year. 

Also, earnings per share are expected in the range of $10.61 to $10.70, down from analysts’ expectations of $10.80. 

Other Developments 

Accenture inked a collaboration deal with Johnson Controls (JCI), a diversified technology and multi-industrial company, to “deliver and operate two new OpenBlue Innovation Centers”. 

Paul Daugherty, technology and chief technology officer at Accenture, said, “Together with Johnson Controls, we will harness technology in new ways, use effective ESG measurement tools and engage the power of ecosystems to solve environmental problems within the building environment.” 

Wall Street’s Take 

Following the results, BMO Capital analyst Keith Bachman maintained a Hold rating on Accenture and reduced the price target to $337 (17.9% upside potential) from $385. 

Staying on the sidelines, Bachman commented, “Our take is that the quarter was solid, but the larger question remains regarding Accenture’s growth in FY23 given tough compares and a looming recession, which historically has meaningfully impacted consulting growth in particular. We would like to get some more visibility on FY23 revs before we would consider getting more constructive.” 

The rest of the Street is cautiously optimistic about the stock, with a Moderate Buy consensus rating based on seven Buys and three Holds. The average Accenture price target of $365.50 implies 27.87% upside potential from current levels. 

Hedge Funds 

TipRanks’ Hedge Fund Trading Activity tool shows that confidence in Accenture is currently Very Positive, as the cumulative change in holdings across all 29 hedge funds that were active in the last quarter was an increase of 223,300 shares.  

Bottom Line 

Considering the long-term prospects of the company, along with hedge funds’ bullish stance, investors may want to consider adding Accenture to their portfolios at current levels. 

Disclosure

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