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Why Is Accenture (ACN) Up 4.2% Since the Last Earnings Report?

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It has been more than a month since the last earnings report for Accenture plc (ACN - Free Report) . Shares have added about 4.2% in that time frame, outperforming the market.

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

Accenture Q4 Earnings and Revenues Surpass Estimates

Accenture reported better-than-expected fourth-quarter fiscal 2017 results. The company posted non-GAAP earnings of $1.48 per share, which came ahead of the Zacks Consensus Estimate by a penny. Moreover, earnings increased from $1.31 per share (includes 37 cents related to gains on the sale of businesses) reported in the year-ago quarter.

Revenues and Bookings

Accenture’s fiscal fourth-quarter net revenue increased 7.8% year over year to $9.149 billion and surpassed the Zacks Consensus Estimate of $9.007 billion. In local currency terms, revenues grew 8% year over year. Net revenue also surpassed the guided range of $8.85 billion and $9.10.

The year-over-year increase was primarily aided by a 7% increase in Consulting revenues ($4.93 billion). Outsourcing revenues were up 9% on a year-over-year basis ($4.22 billion). It is worth mentioning that both Consulting revenues and Outsourcing revenues increased 7% and 8% in local currency, respectively.

Among the operating segments, Communications, Media & Technology revenues were up 7% on a year-over-year basis to $1.82 billion. Revenues from Health & Public Services and Financial Services increased 4% and 9% year over year to $1.61 billion and $1.95 billion, respectively. Revenues from Products and Resources increased 10% and 5% year over year to $2.49 billion and $1.26 billion, respectively.

Geographically, revenues from North Americas and Europe advanced 4% and 10%, respectively. Revenues from Growth Markets (Asia Pacific, Latin America, Africa, the Middle East, Russia and Turkey) increased 14% on a year-over-year basis.

Accenture reported $10.1 billion worth new bookings, which includes a negative impact of 0.5% due to foreign currency fluctuation. Consulting bookings and Outsourcing bookings for the reported quarter totaled $5.1 billion and $5 billion, respectively.

Operating Results

Fiscal fourth-quarter gross margin expanded 20 basis points (bps) on a year-over-year basis to 31.5%, primarily due to a higher revenue base.

Accenture’s non-GAAP operating income was $1.296 billion or 14.2% of net revenue compared with $1.195 billion or 14.1% of revenue reported in the year-ago quarter. Accenture reported $983.2 million in non-GAAP net income or $1.48 per share compared with $881.3 million or $1.31 per share reported in the year-ago quarter.

Balance Sheet & Cash Flow

Accenture exited the fiscal fourth quarter with a total cash balance of $4.13 billion compared with $3.38 billion in the preceding quarter. The company’s long-term debt balance at the end of the quarter was $22.2 million.

Operating cash flow for the quarter was $1.94 billion, while free cash flow was $1.8 billion.

Share Repurchase and Dividend

In line with its policy of returning cash to shareholders, Accenture repurchased 5.2 million shares for $657 million during the fiscal fourth quarter. During the fiscal year 2017, Accenture repurchased 22.1 million shares for $2.65 billion. Accenture’s total remaining share repurchase authority as on Aug 31, 2017 was around $3.1 billion.

The company also paid a semi-annual cash dividend of $1.33 per share (an increase of 10%) during the quarter.

Guidance

For first-quarter fiscal 2018, Accenture expects net revenue between $9.10 billion and $9.35 billion (mid-point $9.225 billion). The company did not provide any earnings per share guidance.

Accenture provided guidance for fiscal 2018. The company now expects net revenue to grow in the range of 5–8% in local currency.

Earnings per share on GAAP basis for fiscal 2018 are now projected in the range of $6.36–$6.60.

For fiscal 2018, the company expects operating margin in the range of 14.9% to 15.1%. The effective tax rate is projected to be in the range of 23–25%. Accenture expects operating cash flow of $5–$5.3 billion and free cash flow of $4.4–$4.7 billion.

How Have Estimates Been Moving Since Then?

Analysts were quiet during the past month as none of them issued any earnings estimate revisions.

Accenture PLC Price and Consensus

 

Accenture PLC Price and Consensus | Accenture PLC Quote

 

VGM Scores

Currently, the stock has a great Growth Score of A, though it is lagging a lot on the momentum front with an F. However, the stock was allocated a grade of B on the value side, putting it in the second quintile 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.

Our style scores indicate that the stock is more suitable for growth investors than value investors.

Outlook

Shares of the company have a Zacks Rank #2 (Buy). We are looking for an above average return from the stock in the next few months.


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