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Accenture (ACN) Down 4.1% Since Last Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for Accenture (ACN - Free Report) . Shares have lost about 4.1% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Accenture due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Accenture’s Surpasses Q1 Earnings & Revenues Estimates

Accenture reported solid first-quarter fiscal 2021 results wherein earnings and revenues surpassed the Zacks Consensus Estimate.

Earnings of $2.17 per share beat the consensus estimate by 6.4% and improved year over year. The bottom line benefited from higher revenues and operating numbers, lower effective tax rate and lower share count.

Net revenues of $11.76 billion beat the consensus mark by 3.4% and increased 4% year over year on a reported basis and 2% in terms of local currency. Net revenues exceeded the guided range of $11.15-$11.55 billion.

Revenues in Detail

On the basis of the type of work, Consulting revenues of $6.33 billion decreased 1% year over year on a reported basis and 2% in terms of local currency. Outsourcing revenues of $5.43 billion increased 9% year over year on a reported basis and 8% in terms of local currency.

Segment-wise, Communications, Media & Technology revenues of $2.33 billion improved 4% year over year on a reported basis and 3% in terms of local currency. Financial Services revenues of $2.35 billion increased 7% year over year on a reported basis and 5% in terms of local currency. Health & Public Service revenues of $2.21 billion increased 12% year over year on a reported basis and 11% in terms of local currency. Products revenues of $3.21 billion were flat in U.S. dollars and down 3% in terms of local currency. Resources revenues of $1.66 billion decreased 4% year over year on a reported basis and 5% in terms of local currency.

Geographically, revenues of $5.48 billion from North Americas increased 4% year over year on a reported basis as well as in terms of local currency. Revenues of $3.97 billion from Europe increased 5% on a reported basis but declined 1% in terms of local currency. Revenues from Growth Markets of $2.31 billion increased 1% year over year on a reported basis and 3% in terms of local currency.

Booking Trends

Accenture reported new bookings worth $12.9 billion, up 25% year over year. Consulting bookings and Outsourcing bookings totaled $6.6 billion and $6.3 billion, respectively.

Operating Results

Gross margin (gross profit as a percentage of net revenues) for the first quarter of fiscal 2021 increased 100 basis points (bps) to 33.1%. Operating income was $1.89 billion, up 6.8% year over year. Operating margin in the reported quarter expanded 50 bps to 16.1%.

Balance Sheet & Cash Flow

Accenture exited first-quarter fiscal 2021 with total cash and cash equivalents balance of $8.59 billion compared with $8.42 billion at the end of the prior quarter. Long-term debt was $59.8 million compared with $54.1 million at the end of the prior quarter.

Cash provided by operating activities crossed $1.60 billion in the reported quarter. Free cash flow came in at $1.51 billion.

Dividend Payout

On Nov 13, 2020, the company paid out a quarterly cash dividend of 88 cents per share to shareholders of record at the close of business on Oct 13, 2020. These cash dividend payouts totaled $558 million.

The company has declared another quarterly cash dividend of 88 cents per share, to be paid out on Feb 12, 2021 for shareholders of record at the close of business on Jan 14, 2021.

Share Repurchases

In line with the policy of returning cash to its shareholders, Accenture repurchased 3.3 million shares for $769 million in the fiscal first-quarter 2021. The company had approximately 634 million total shares outstanding as of Nov 30, 2020.

Guidance

Second-Quarter Fiscal 2021

For second-quarter fiscal 2021, Accenture expects revenues of $11.55-$11.95 billion. The assumption is inclusive of a positive foreign-exchange impact of 3%.

Fiscal 2021

Accenture has raised its guidance for fiscal year 2021. Revenues are now expected to register 4-6% growth in terms of local currency compared with the prior growth rate of 2-5%.

The company now expects positive foreign-exchange impact of 3% on its results in U.S. dollars compared with the prior foreign-exchange assumption of 2%.

Operating cash flow is now anticipated in the range of $6.65-$7.15 billion compared with the prior guidance of $6.35-$6.85 billion. Free cash flow is now expected between $6.0 billion and $6.5 billion compared with the prior guidance of $5.7 billion to $6.2 billion.

The company expects adjusted EPS in the range of $8.02-$8.25. Operating margin for the fiscal year is expected to be between 14.8% and 15%, indicating an expansion of 10-30 bps from fiscal 2020. Annual effective tax rate is anticipated in the range of 23.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates revision.

VGM Scores

Currently, Accenture has a strong Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Accenture has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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