Accenture's Strong Quarter: Second Half Guidance Below Analyst Forecasts

Yesterday Accenture (ACN) reported second-quarter fiscal 2007 financial results:

Accenture reported strong financial results for the second quarter of fiscal 2007, ended Feb. 28, with net revenues of $4.75 billion, a year-over-year increase of 16 percent in U.S. dollars and 10 percent in local currency. Consulting and outsourcing revenues both grew by double digits in U.S. dollars. GAAP diluted earnings per share were $0.47, compared with $0.11 in the same period last year. EPS of $0.47 increased 27 percent over adjusted EPS of $0.37 in the second quarter last year, reflecting the items described below under Financial Review.

The adjustment from last year relates to a provision taken due to the loss of a major contract. Analysts were expecting the company to earn $0.42 on $4.7 billion in revenues. The outlook was also fairly strong:

Third Quarter Fiscal 2007
Accenture expects net revenues for the third quarter of fiscal 2007 to be in the range of $4.9 billion to $5.1 billion.

Fiscal Year 2007
For the full fiscal year 2007, Accenture now expects net revenue growth to be at the high end of its previously communicated range of 9 percent to 12 percent in local currency. The company has revised its outlook for diluted EPS upward to the range of $1.88 to $1.93, which is $0.08 higher than its previously communicated range of $1.80 to $1.85.

The company continues to expect operating cash flow to be $1.95 billion to $2.15 billion; property and equipment additions to be $335 million; and free cash flow to be in the range of $1.6 billion to $1.8 billion. The company now expects its annual effective tax rate to be in the range of 34 percent to 36 percent. Accenture continues to target new bookings for fiscal 2007 in the range of $22 billion to $24 billion.

Although the company raised its estimates for the year, analyst estimates were already above the previous guidance range, at $1.87. Since Accenture beat by a nickel in the current quarter, the $1.88-$1.93 guidance actually would appear to indicate that earnings per share in the second half will be lower than analysts were forecasting.