Seeking Alpha
Profile| Send Message|
( followers)  

Accenture plc (NYSE:ACN) is scheduled to announce its second quarter fiscal 2012 results on March 22, 2012, and we notice some mixed movements in analyst estimates.

First Quarter Overview

Accenture delivered decent first quarter results, beating the Zacks Consensus Estimate by 2 cents on the bottom line. The quarter’s earnings came in at 96 cents, up 19.6% from the year-ago quarter. The outperformance was attributable to higher revenues and margins, a lower share count and tax rate as well as favorable foreign-exchange rates.

The company’s reported revenue increased 17.0% year over year to $7.07 billion, driven by healthy segment performances and strong demand for its offerings across the served industries. Geographical contributions were also encouraging.

Despite higher revenue, gross margin fell short of the year-ago figure due to higher subcontractor costs, recruiting and training costs as well as an increase in annual compensation. But operating cost control measures led to an operating margin expansion by 20 basis points.

Guidance

For the second quarter of fiscal 2012, Accenture expects net revenue in the range of $6.5 billion to $6.8 billion, reflecting a weak sequential comparison. This figure was arrived at after considering a 1% negative foreign-exchange impact. For FY12, net revenue growth is projected in the range of 7.0% to 10.0%. Expectations for new bookings were maintained in the range of $28.0 billion to $31.0 billion.

For full fiscal 2012, the company expects its operating margin in the range of 13.7% to 13.9% and an annual tax rate between 27.0% and 28.0%. Diluted EPS is expected between $3.76 and $3.84, lower than the prior expected range of $3.80–$3.88.

For full story on the earnings release, please look in: Accenture Beats Despite Euro Crisis

Agreement of Analysts

The analysts are of opinion that its consulting/outsourcing/offshore combination continues to support global enterprise clients’ demand for high-end but cost effective service delivery. Given its global footprint and client base, Accenture will remain well positioned to benefit from multiple technology drivers including cloud initiatives, SaaS, mobility, digital marketing, analytics, and others.

Some analysts think further margin expansion is possible over time, particularly given the company's Global Delivery Network expansion over the past few years.

Out of the 18 and 20 analysts providing estimates for the second quarter and fiscal 2012, 3 revised their estimates upward in the last 7 days. Also, among the 19 analysts providing estimates for fiscal 2013, 3 increased their estimates in the past 7 days.

However, there was only one downward revision in the past 7 days reflecting the European debt concern that could affect Accenture’s business growth in the region.

Magnitude of Estimate Revisions

The movements in the Zacks Consensus Estimates for the second quarter and fiscal 2012 were nominal but positive. In the past 7 days, Zacks Consensus Estimates for the second quarter and fiscal 2012 moved up by a penny to 86 cents and $3.81, respectively. The Zacks Consensus Estimate for fiscal 2013 also increased a penny to $4.24 in the past 7 days.

Recommendation

We remain encouraged by the company’s resilience to tougher comparisons and a continued uncertain macro environment. Accenture seems to be in a growth momentum. This can be inferred from its commentary in the conference call in which it promised to continue investing in priority industries (such as Communications) and emerging markets as well as boost its brand value.

Accenture’s deal prospects look bright. Moreover, the company’s endeavor to expand in Asia is also encouraging. With the west facing threats of a double-dip, all eyes are now turned toward Asia. With the continuous emergence of hi-tech innovations there, Accenture could ink deals in technology services, as well as outsourcing and consulting services.

We are encouraged by the steady flow of new business and believe that the trend will continue. However, increasing competition from International Business Machines Corp. (NYSE:IBM), a strained spending environment and Accenture’s broad European exposure may temper its growth prospects to some extent.

Currently, Accenture has a Zacks #2 Rank, implying a short-term Buy recommendation.

ACCENTURE PLC (ACN): Free Stock Analysis Report

INTL BUS MACH (IBM): Free Stock Analysis Report

Source: Accenture: Earnings Preview