Accenture Beats Third Quarter Estimates, Narrows Fiscal Year 2020 View

Accenture Beats Third Quarter Estimates, Narrows Fiscal Year 2020 View
June 26, 2020

 

Global consulting firm Accenture PLC (NYSE: ACN) reported fiscal 2020 third-quarter earnings and revenues above the Street estimates. However, the reported Q3 earnings were slightly down from the same period last year. The company also narrowed its FY 2020 earnings and revenue growth outlook, while issuing a revenue view for 4Q 2020. The earnings and revenue beat enabled the company’s stock to hit a new 52-week high of $217.89 before closing at $217.32, up 7.67%, or $15.48 from the prior trading session.

The Dublin, Ireland-based company reported third-quarter revenues of $10.99 billion, down 1% from $11.10 billion in the comparable quarter last year. Analysts polled by Investing.com had estimated revenues of $10.73 billion for the reported period. Consulting revenues declined 4% to $6.0 billion. On the contrary, outsourcing revenues increased 3% to $5 billion.

For the quarter ended May 31st, the company posted earnings of $1.23 billion, or $1.90 per share, down from $1.25 billion, or $1.93 a share, in the comparable quarter last year. Excluding one-time charges, analysts had anticipated the company to generate earnings of $1.86 per share.

Julie Sweet, Accenture’s CEO, commented on the results as follows: “[….] I am proud of how we helped ensure the business continuity of our clients while prioritizing the health and well-being of our people and continued to deliver on our commitments to our shareholders. We delivered third-quarter financial results that aligned with our expectations, including revenue growth in the top end of our guided range as well as strong profitability and free cash flow while continuing to invest in our business and our people.”

Segment-wise,

  • Communications, Media & Technology revenues were $2.20 billion, down 2% from last year.
  • Financial services revenues fell 3% y-o-y to $2.14 billion.
  • Health & Public Service revenues were $2.02 billion, up 11% from $1.82 billion in the prior-year period.
  • Products revenues were $3 billion in 3Q20, compared with $3.08 billion in 3Q 2019.
  • Resources revenues were $1.64 billion, down 6% from $1.75 billion in the year-ago period.

By geographic market,

  • North American revenues were $5.24 billion, an increase of 2% on a y-o-y basis.
  • European revenues were $3.57 billion, down 5% from $3.77 billion last year.
  • Growth Markets revenues were $2.18 billion, almost flat from the previous year.

During Q3 2020, gross margin improved to 32.1%, from 31.8% in the year-ago period. Operating cash flow increased to $2.74 billion from 2.12 billion. Likewise, free cash flow rose to $2.59 billion, from $1.98 billion. New bookings for the third quarter were $11 billion. Specifically, outsourcing bookings were $4.80 billion, while consulting bookings were $6.20 billion. Total cash balance at the end of May 31st was $6.40 billion, up from $5.40 billion in the earlier quarter and $6.10 billion in the similar quarter of 2019.

For 4Q 2020, Accenture anticipates revenues in the range of between $10.60 billion and $11 billion, mirroring the company’s expectation of a -1% currency exchange impact compared with 4Q 2019. Analysts are anticipating fourth-quarter revenues of $10.88 billion.

For fiscal 2020, the company now anticipates earnings of between $7.57 and $7.70 per share on revenue growth of 3.5% to 4.5% in national currency. Earlier, the company had forecast earnings of between $7.48 and $7.70 per share on revenue growth of 3% to 6% in local currency. The Wall Street analysts anticipate the company to post earnings of $7.58 per share on revenues of $44.27 billion, reflecting a growth of 2.4%.

The company also boosted its quarterly cash dividend by 10% to $0.80 per share, payable on August 14th, 2020. During 3Q 2020, Accenture repurchased 3.70 million shares worth $627 million.

The impressive quarterly results and dividend increase is expected to keep the stock of Accenture bullish in the short-term.

acn - technical analysis - 26th June 2020

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Andrew Wright

Prior to founding tradersasset.com in 2014, Andrew worked as a proprietary trader, then as a market maker. As a market maker, he traded options in over 100 stocks, he then began trading currency pairs in 2013. Andrew still actively trades both, and prides himself on educating and informing traders on the benefits of both Binary Options and Forex.


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