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Accenture (ACN) Q4 Earnings and Revenue Surpass Estimates
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Accenture plc (ACN - Free Report) 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.
The Accenture stock has returned 16.7% year to date, outperforming 14.9% growth recorded by the industry it belongs to.
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 totalled $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 Zacks Consensus Estimate is pegged at $9.04 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. The Zacks Consensus Estimate is pegged at $5.90.
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.
Our Take
Accenture delivered strong fourth-quarter fiscal 2017 results, wherein the top and bottom lines, both, surpassed the respective Zacks Consensus Estimate and marked year-over-year improvement. Moreover, the company provided and encouraging first-quarter and fiscal 2018 outlook.
Going ahead, the company’s long-term prospects look promising, driven by sustained focus on innovative product roll outs, consistent investments in enhancing digital and marketing capabilities, along with major acquisitions. In addition, we believe regular acquisitions will significantly contribute to the revenue stream.
However, Accenture’s announcement of creating 15K new jobs by 2020 and investment plan of $1.4 billion for employee training and opening of 10 innovation centers across the U.S. cities may dent its bottom-line results, in our opinion.
Additionally, increasing competition from peers such as Cognizant Technology Solutions (CTSH - Free Report) and IBM Corp. (IBM - Free Report) , and an uncertain macroeconomic environment may deter its growth to some extent.
Applied Materials has a long term-expected EPS growth rate of 17.1%.
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It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
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Accenture (ACN) Q4 Earnings and Revenue Surpass Estimates
Accenture plc (ACN - Free Report) 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.
The Accenture stock has returned 16.7% year to date, outperforming 14.9% growth recorded by the industry it belongs to.
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 totalled $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 Zacks Consensus Estimate is pegged at $9.04 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. The Zacks Consensus Estimate is pegged at $5.90.
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.
Our Take
Accenture delivered strong fourth-quarter fiscal 2017 results, wherein the top and bottom lines, both, surpassed the respective Zacks Consensus Estimate and marked year-over-year improvement. Moreover, the company provided and encouraging first-quarter and fiscal 2018 outlook.
Going ahead, the company’s long-term prospects look promising, driven by sustained focus on innovative product roll outs, consistent investments in enhancing digital and marketing capabilities, along with major acquisitions. In addition, we believe regular acquisitions will significantly contribute to the revenue stream.
However, Accenture’s announcement of creating 15K new jobs by 2020 and investment plan of $1.4 billion for employee training and opening of 10 innovation centers across the U.S. cities may dent its bottom-line results, in our opinion.
Additionally, increasing competition from peers such as Cognizant Technology Solutions (CTSH - Free Report) and IBM Corp. (IBM - Free Report) , and an uncertain macroeconomic environment may deter its growth to some extent.
Accenture currently has a Zacks Rank #3 (Hold).
A better-ranked stock worth considering includes Applied Materials, Inc. (AMAT - Free Report) , which carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Applied Materials has a long term-expected EPS growth rate of 17.1%.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Click here for the 6 trades >>