IT solutions provider Accenture (NYSE: ACN) reported lower than anticipated fiscal 2024 third-quarter earnings and revenues. The company also downwardly revised its FY 2024 revenue growth projections for the second time. However, Accenture issued a solid fourth-quarter revenue outlook. The company also revealed a solid order backlog for AI-related services. This enabled the stock to gain $20.81, or 7.29%, to end Thursday’s trading session at $306.16.
The New York-based company reported third-quarter revenues of $16.47 billion, down 1% from $16.56 billion in the third quarter of fiscal 2023.
For the latest quarter, which ended May 31, 2024, Accenture posted net income of $1.93 billion, or $3.04 per share, compared with $2.01 billion, or $3.15 per share, in the quarter that ended on May 31, 2023.
Excluding adjustments, the company’s Q3 2024 non-GAAP net income was $2.04 billion, or $3.13 per share, down from $2.07 billion, or $3.19 per share, in Q3 2023.
Analysts surveyed by LSEG anticipated the company to report adjusted earnings of $3.15 per share on revenues of $16.53 billion.
Julie Sweet, Chair and CEO of Accenture, remarked on the results, “Our actions to stay laser-focused on the needs of our clients are clear in our third quarter results. We also achieved two significant milestones this quarter — with $2 billion in Generative AI sales year-to-date and $500 million in revenue year-to-date — which demonstrate our early lead in this critical technology”
Segment wise:
- Communications, Media & Technology revenues fell by 4% y-o-y to $2.76 billion.
- Finance services revenues were $2.89 billion, a decrease of 8% from last year.
- Health and public service revenues grew by 8% y-o-y to $3.52 billion.
- Product revenues were $4.98 billion, almost unchanged from the previous year.
- Resources revenues were $2.31 billion, almost flat from last year.
Overall, based on the nature of work:
- Consulting revenues declined 3% y-o-y to $8.46 billion.
- Managed services revenues rose by 2% y-o-y to $8.01 billion.
Interestingly, the company revealed that the order backlogs for generative AI surpassed $900 million in 3Q 2024. Overall, Accenture has received cumulative generative AI orders worth $2 billion so far in FY 2024.
Overall, Accenture’s new bookings increased by 22% to $21.06 billion in the third quarter, up from $17.25 billion in the comparable quarter of fiscal 2023.
The company’s GAAP operating margin rose by 180 basis points (year-on-year) to 16% in the recent quarter. Likewise, Accenture’s adjusted operating margin grew by 10 basis points to 16.40%.
Looking forward, Accenture forecasts Q4 revenues in the range of between $16.05 billion and $16.65 billion.
Furthermore, the company now projects FY 2024 revenue growth in the range of 1.50% to 2.50%, narrowing from the earlier guidance range of 1% to 3%. Wall Street analysts anticipate Accenture to post revenue growth of 1.60% on a y-o-y basis. Notably, in 1Q 2024, Accenture had forecast FY 2024 revenue growth in the range of 2% to 5%.
The annual growth outlook hinges significantly on the increasing adoption of artificial intelligence, counteracting any downturns, sluggish growth in enterprise output and a strong greenback.
The company also upwardly revised its lower end of FY 2024 effective tax rate guidance to a range of 23.50% to 24.50%, from 22.50% to 24.50% issued earlier.
Accenture also announced a quarterly cash dividend of $1.29 per share, reflecting a 15% increase from the earlier dividend payout of $1.12 per share, payable on August 15, 2024.
The quarterly earnings miss, coupled with strong generative AI orders, is expected to keep the stock of Accenture range-bound in the short term.
The historical price chart shows that Accenture’s stock is on the rise following a test of support at $285. The next expected resistance level is around $325. Furthermore, the stock is currently trading above its 50-day moving average, and the ultimate oscillator is moving upward toward the bullish zone. As a result, we expect Accenture’s stock to continue its upward trend in the upcoming trading sessions.
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