Accenture (ACN -5.6%) now expects FY14 (ends in August) local currency revenue growth of 3%-6% and (thanks to a lower tax rate) EPS of $4.50-$4.62, up from prior forecasts of 2%-6% and $4.44-$4.56. But the company has lowered its free cash flow guidance range by $300M to $2.9B-$3.2B.
FY14 new bookings guidance has been raised by $1B to $33B-$36B. FQ3 revenue guidance is set at $7.4B-$7.65B, in-line with a $7.56B consensus.
Consulting bookings rose by $200M Y/Y in FQ2 to $4.6B, and outsourcing bookings by $800M to $5.5B. Consulting revenue -1% Y/Y, even with FQ1. Outsourcing revenue +4% vs. +5%.
Much like IBM, Cisco, and several other tech giants, Accenture continues to struggle in Asia-Pac: Sales fell 7% Y/Y (4% exc. forex) to $908M after dropping 6% in FQ1. Americas sales +2% to $3.36B, EMEA +2% to $2.8B.
The health/public service vertical was a weak spot, with sales dropping 1% after rising 5% in FQ1. Financial services +4%, telecom/media/tech flat, products +4%, resources -2%.
Gross margin -30 bps Y/Y to 31.3%. SG&A spend fell to 17.9% of revenue from 18.3% a year ago.
$739M was spent on buybacks. Accenture still expects to spend $3.7B or more in FY14 on dividends and buybacks.
"We've watched the work that 3G has done with AB InBev and Heinz," says Mondelez CEO Irene Rosenfeld, "and we believe they can be of great help to us."
3G uses "zero-based budgeting" whereby managers have to build budgets from scratch each year rather than basing them on the previous one. It means that executives have to re-justify expenses every year.
Following the acquisition of Heinz by 3G and Berkshire Hathaway, the food group has cut 2,000 jobs and closed three plants.
The U.S. government isn't renewing its contract with CGI Group (GIB) to oversee key parts of the Obamacare enrollment website, HealthCare.gov, which struggled with technical problems when it launched in October.
CGI's contract was set to expire Feb. 28 but included options to continue work for as long as 18 months; the government reportedly will instead sign a new contract with Accenture (ACN).
Aside from the political crisis for Pres. Obama caused by the website's troubled rollout, critics also said the insider-driven contract with CGI was an example of crony government at its worst.
Accenture (ACN +4.4%) is guiding for FQ2 revenue of $6.95-$7.25B, below a consensus of $7.28B. But the company is also reiterating guidance for 2%-6% FY14 (ends Aug. '14) local currency revenue growth, and (due to a smaller forex hit) slightly raising its FY14 EPS guidance range to $4.44-$4.56 from $4.42-$4.54 (consensus is at $4.47).
New bookings totaled $8.7B in FQ1, up from $8.4B in FQ4 and a depressed $7.5B in the year-ago period. Consulting ($4.3B) and outsourcing ($4.4B) respectively made up 49% and 51% of bookings vs. 46% and 54% in FQ4.
Opex rose 1% Y/Y, slightly less than rev. growth of 2%. Gross margin was 33.3%, +10 bps Q/Q and +50 bps Y/Y.
Americas revenue +3% Y/Y vs. +8% in FQ4, EMEA +3% vs. +2%, Asia-Pac -6% vs. -7%. Plenty of other tech companies have also been struggling in Asia-Pac.
Telecom/media/tech sales -3%, financial services +2%, health & public service +5%, products +6%, resources flat.
$722M was spent on buybacks, down from $1.1B in FQ4. The company added $5B to its buyback plan in September.
Citing the impact of faster-than-expected cloud computing adoption, Morgan Stanley's Katy Huberty has downgraded Accenture (ACN -1.9%) and NetApp (NTAP -0.9%) to Equal Weight. Meanwhile, citing more favorable risk/reward, Huberty has upgraded Western Digital (WDC +2.8%) to Overweight and Brocade (BRCD +0.5%) to Equal Weight.
Concerns about the impact of cloud services on sales of IT outsourcing services such as Accenture's, and enterprise storage hardware such as NetApp's, have been around for some time. Recent numbers (I, II) provided by the companies, and by peers such as IBM and EMC, haven't done much to soothe those fears. Synergy Research recently estimated sales of cloud infrastructure (IaaS) and app platform (PaaS) services rose 46% Y/Y in Q3.
Accenture now trades at 15x estimated FY14 (ends Aug. '14) EPS exc. net cash, and NetApp trades at just 10x estimated FY14 (ends April '14) EPS exc. net cash.
Western Digital, whose hard drive sales have been pressured by PC weakness and SSD adoption, recently began shipping its first helium drives (they're lighter, denser, and more power-efficient than traditional drives), in part to better meet the needs of Web/cloud companies.
Accenture (ACN) is acquiring the industrial/embedded software development and services ops of Hungarian software development/engineering services firm evopro. Terms are undisclosed. (PR)
Accenture declares the deal will aid its clients in their industrial software development efforts, and will also strengthen its mobile software development abilities.
Evopro operates in Germany, Hungary, Romania, and Turkey, and has 1K+ employees. The purchase is the latest in a string of acquisitions Accenture has recently made, as it looks to M&A to improve growth in the face of soft consulting demand.
Infosys' (INFY +6.1%) FQ2 beat and in-line FY14 revenue guidance (9%-10% growth vs. 9.3% consensus) is providing a lift to IT outsourcing peers Cognizant (CTSH +5.4%), Wipro (WIT +4.2%), and Accenture (ACN +1.7%)
Cognizant and Wipro have made new 52-week highs. In July, both companies rallied in response to Infosys' FQ1 beat. All four companies sold off last month after Cognizant provided soft revenue and bookings guidance (more the result of consulting weakness rather than outsourcing)
Infosys' CC remarks could also be helping out the group. CEO S.D. Shibulal mentioned demand from financial services clients is picking up, retail/consumer products demand remains healthy, and European firms are showing greater interest in outsourcing across verticals. However, manufacturing spend is "relatively stagnant," and and the energy, utilities, and telecom verticals remain challenging.
15 cloud/big data-related deals were signed in FQ2. Cloud services represent both a growth opportunity for outsourcing firms, and (to the extent in-house projects are abandoned for public cloud services) a long-term threat.
The rupee's decline boosted Infosys' EBIT margin by 250 bps, but wage hikes took a 300 bps toll.
Procurian has 780 employees, and offers procurement-related BPO services. The all-cash deal is expected to close by year's end. ICG (ICGE +13.3%), which had a market cap of only $527M going into today, has jumped on the news. (PR)
Accenture (ACN -0.4%), which has been buying companies at an increasingly frequent pace as organic growth slows, says Procurian will augment its existing procurement BPO offerings. In particular, Accenture touts the company's strategic sourcing, analytics, and delivery capabilities.
Procurian is based out of Pennsylvania, has delivery locations in the U.S. and several other countries.