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Accenture Pre-Q4 Earnings: Is the Stock a Portfolio Must-Have?

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Key Takeaways

  • Accenture projects Q4 EPS of $2.98 and revenues of $17.3B, signaling year-over-year growth.
  • GenAI bookings hit $1.5B in Q3, while revenues surpassed $700M, fueling client reinvention.
  • ACN ended Q3 with $9.6B in cash and rising managed services demand.

Accenture plc (ACN - Free Report) is set to report fourth-quarter fiscal 2025 results on Sept. 25, before market open.

The Zacks Consensus Estimate for earnings is pegged at $2.98 per share, suggesting 6.8% growth from the year-ago quarter’s reported level. The consensus estimate for revenues is $17.3 billion, hinting at 5.6% year-over-year growth.

Accenture PLC Price and EPS Surprise

 

Accenture PLC Price and EPS Surprise

Accenture PLC price-eps-surprise | Accenture PLC Quote

There has been no change in analyst estimates or revisions lately.

 

Zacks Investment ResearchImage Source: Zacks Investment Research

 

ACN’s earnings surpassed the Zacks Consensus Estimate in three of the trailing four quarters and missed once, delivering an average surprise of 3%.

Lower Chance of Q4 Earnings Beat for ACN

Our proven model does not conclusively predict an earnings beat for Accenturethis time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that is not the case here. You can uncover the best stocks before they are reported with our Earnings ESP Filter.

ACN currently has an Earnings ESP of 0.00% and a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

GenAI to be ACN’s Key Driver in Q4

In the third quarter of fiscal 2025, GenAI bookings touched the $1.5-billion mark with revenues exceeding $700 million. We expect GenAI bookings to surge as the company views this technology as the catalyst for reinvention, a strategy to assist clients in sailing through new challenges and achieve greater feats. Furthermore, per MarketsandMarkets, the GenAI market is anticipated to see a 43.4% CAGR during 2025-2032, favoring Accenture’s growth trajectory.

ACN’s clients recognize GenAI as a key driver of large-scale reinvention. To meet this growing demand, the company has established reinvention services, a business unit dedicated to increasing AI solution adoption by clients. Additionally, Accenture plans to expand its AI workforce to 75,000, aiming for 80,000 employees by the end of fiscal 2026. Such a significant increase is anticipated by the company when it gauges the need to meet growing demands for AI services. Hence, we are bullish on Accenture’s ability to register top-line growth, banking on GenAI technology.

ACN’s Stock Comparison With Peers

Accenture shares have declined 29.4% over the past year, compared with the 11.9% dip of its industry and the 18.7% rise of the Zacks S&P 500 composite. The company has underperformed its industry peers, TaskUs (TASK - Free Report) and Baozun (BZUN - Free Report) , which reported 39.2% and 55.2% growth, respectively.

1-Year Price Performance

 

Zacks Investment ResearchImage Source: Zacks Investment Research

 

Over the past three months, ACN has dipped 18.8% compared with the 6.1% decline of the industry and the 12.5% growth of the Zacks S&P 500 composite. The stock has failed to surpass its industry peers as TaskUs and Baozun grew 4.7% and 63.7%, respectively.

ACN is currently trading at a trailing 12-month price-to-earnings ratio of 17.43X, lower than the industry’s 26.4X. However, the stock is trading at a premium when compared with TaskUs and Baozun’s 15.09X and 15.5X, respectively.

Accenture’s Investment Considerations

The rising demand for ACN’s modernization and maintenance of applications, cloud enablement, and cybersecurity-as-a-service is boosting its managed services business. In fiscal 2024, revenues in this segment improved 4% year over year, and we expect it to rise 8.2% in fiscal 2025.

Accenture has a significantly strong cash position with cash and cash equivalents of $9.6 billion in the third quarter of fiscal 2025 against its long-term debt of $5 billion. Operating activities have generated $3.9 billion in the aforementioned quarter, and the free cash flow stood at $3.5 billion. Such a robust cash position enables the management to invest proactively, allowing it to enhance its technical prowess.

On the liquidity front, ACN’s current ratio of 1.46 at the end of the August quarter stands lower than its industry average of 2.12. Despite underperforming the industry, the metric has improved 25.8% from the year-ago quarter on the back of its robust cash position. Accenture’s liquidity position is further solidified as the metric exceeds 1, highlighting its ability to cover short-term obligations easily.

 

Zacks Investment ResearchImage Source: Zacks Investment Research

 

Accenture’s buyout strategy is certainly interesting, as it acquires numerous companies in a given year. In fiscal 2024, the company made 46 acquisitions, and this month, it acquired two companies, IAMConcepts and MomentumABM. Although a rapid buyout strategy strengthens its industry expertise, the company faces high integration risks. Investors may consider this a red flag since heightened integration risks may hamper long-term organic growth.

ACN operates in a labor-intensive and foreign talent-dependent industry. A key risk that the company tackles is higher talent costs due to a competitive talent market. Furthermore, fast-paced growth of AI enables clients to improve their performance independently, lowering the reliance on companies like Accenture.

Hold on to ACN for Now

The GenAI market expansion, coupled with Accenture’s ability to secure bookings as client demand increases, provides a solid push in its growth narrative. Growing demand for its managed services business is a key driver of the top line. The company has a strong cash position, which has boosted its liquidity, improving its debt-coverage ability.

While Accenture’s buyout strategy solidifies its industry expertise, the high integration risks affect investor sentiment, as long-term organic growth seems to be at risk. Furthermore, higher talent costs resulting from a competitive talent market and a lack of reliance on the company by potential clients due to AI add to investor concerns.

We recommend investors refrain from buying the ACN stock since it is facing challenges ahead of its earnings release on Sept. 25. Investors are urged to monitor the stock’s movement post earnings to gauge a preferable entry point, as a hasty decision may affect portfolio gains.


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