Accenture (ACN) jumped roughly 8% today on the back of solid earnings released last night. Anybody following the Net Payout Yields would've been alerted to jump into this stock long before this report. Even after a big run the last few months, ACN has a solid dividend of 2% and repurchased $620M worth of shares during the last quarter, providing a roughly 8% buyback yield. The total Net Payout Yield jumps to nearly 10% even with the jump in stock price.
ACN raised full year guidance to a mid point of $3.12 a share, easily exceeding the $3.04 estimate. Part of this is due to the $.04 gain in this quarter alone from the buybacks. Then again analysts know they plan to buyback shares so that should be factored into estimates.
Lots of investors continue to slam buybacks, but ACN provides an ample example of how they can work so masterfully. With the stock depressed over the last year, ACN used its good balance sheet and strong cash flow to buy back shares on the cheap. So cheap that it was very accretive to earnings. Much better then paying a 40% premium to buy other assets. Why not buy your own shares at a discount? Especially when management sees a bright future and a low stock price.
Another reason the stock jumped was the mention that customers were starting to accelerate investments to position themselves for a economic recovery and to keep up with new technology such as cloud computing. Any concept that ACN is gaining because of cloud computing will naturally send the stock higher in this cloud computing mania.
Also, management indicated that public spending remained strong, a contrast to the statements out of Cisco Systems (CSCO). Makes us more concerned about the CSCO position as signs continue to mount that CSCO has either missed the cloud computing sector or has just completely lost the ability to juggle all the different divisions as companies look more toward best of breed versus a complete solution.
- Revenues increase 12% in U.S. dollars and 14% in local currency, to $6.05 billion
- EPS up 20%, to $0.81