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Accenture (ACN) Q4 Earnings & Revenues Surpass Estimates

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Accenture plc (ACN - Free Report) reported strong fourth-quarter fiscal 2018 results wherein both earnings and revenues surpassed the Zacks Consensus Estimate.

Adjusted earnings of $1.58 per share surpassed the Zacks Consensus Estimate by 3 cents and came ahead of the year-ago figure by 10 cents. The bottom line benefited from higher revenues and operating results, higher non-operating income and lower share count. These were, however, partially offset by higher effective tax rate and higher income attributable to non-controlling interests.

Net revenues of $10.1 billion beat the consensus mark by $173.7 million and increased 11% year over year on a reported basis as well as in terms of local currency. Net revenues also surpassed management’s guided range of $9.80-$10.05 billion.

So far this year, shares of Accenture have gained 11.4%, outperforming the 8.8% rise of the Zacks S&P 500 Composite Index.

 

Revenues Details

On the basis of type of work, Consulting revenues (55% of net revenues) of $5.54 billion increased 12% year over year on a reported basis as well as in terms of local currency. Outsourcing revenues (45%) of $4.61 billion increased 9% year over year on a reported basis as well as in terms of local currency.

Among the operating segments, Communications, Media & Technology revenues (20% of net revenues) of $2.09 billion increased 15% year over year on a reported basis as well as in terms of local currency. Financial Services revenues (20%) of $2.01 billion increased 3% year over year on a reported basis as well as in terms of local currency.  Health & Public Service revenues (17%) of $1.71 billion increased 6% year over year on a reported basis as well as in terms of local currency. Products revenues (28%) of $2.79 billion increased 12% year over year on a reported basis as well as in local currency. Resources revenues (15%) of $1.52 billion increased 20% year over year on a reported basis as well as in local currency.

Geographically, revenues from North Americas (46% of net revenues) of $4.71 billion increased 11% year over year on a reported basis and in local currency. Revenues from Europe (34%) of $3.44 billion increased 10% year over year on a reported basis and 8% in terms of local currency. Revenues from Growth Markets (20%) of $1.99 billion increased 12% year over year on a reported basis and 15% in terms of local currency.

Booking Trends

Accenture reported new bookings worth $10.8 billion. Consulting bookings and Outsourcing bookings for the reported quarter totaled $6.1 billion and $4.7 billion, respectively.

Operating Results

Gross margin (gross profit as a percentage of net revenues) for the fourth quarter of fiscal 2018 improved 30 basis points to 31.8%. Operating income was $1.45 billion, up 11.3% year over year. Operating margin for the reported quarter expanded 10 bps.

Balance Sheet & Cash Flow

Accenture exited the fiscal fourth quarter with total cash and cash equivalents balance of $5.06 billion compared with $3.93 billion at the end of the prior quarter. Long-term debt was $19.7 million compared with $25.9 million at the end of the prior quarter. Cash provided by operating activities was $2.11 billion in the reported quarter. Free cash flow came in at $1.93 billion.

Dividend Payment

In the quarter, Accenture’s board of directors declared a semi-annual cash dividend of $1.46 per share, reflecting an increase of 10% over the previous semi-annual dividend declared in March. This dividend is payable on Nov 15 for shareholders of record at the close of business on Oct 18.

Additionally, the company’s board approved dividends on a quarterly basis, effective first-quarter fiscal 2020.

Share Repurchases

In line with its policy of returning cash to shareholders, Accenture repurchased 3 million shares for $552 million in the fiscal fourth quarter. The company had approximately 640 million total shares outstanding as of Aug 31.

Accenture’s board of directors approved $5 billion in additional share repurchase authority, bringing the company’s total outstanding authority to approximately $6.0 billion.

Guidance

First Quarter Fiscal 2019

For first-quarter fiscal 2019, Accenture expects revenues to be in the range of $10.35- $10.65 billion, which reflects 7-10% growth in local currency. The assumption is inclusive of a negative foreign-exchange impact of 2%.

The Zacks Consensus Estimate of $10.19 billion is well below the mid-point of the currently guided range for first-quarter fiscal 2019.

Fiscal 2019

Accenture’s fiscal 2019 guidance includes a negative foreign-exchange impact of 2.5% on its results in U.S. dollars. Also, the company is adopting new accounting standards, effective fiscal 2019.

For fiscal 2019, the company expects revenues to register 5-8% growth in terms of local currency. Earnings per share are anticipated in the range of $6.98 to $7.25.

Operating margin for fiscal 2019 is expected to be in the range of 14.5-14.7%, indicating an expansion of 10 to 30 basis points from fiscal 2018. The uptick can be attributed to impact of the new revenue and pension accounting standards.

The company expects operating cash flow to lie between $5.75 billion and $6.15 billion and free cash flow to lie in the range of $5.1-$5.5 billion. Annual effective tax rate is expected to be between 23 and 25%.

Zacks Rank & Upcoming Releases

Currently, Accenture carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Investors interested in the broader Business Services sector are keenly awaiting earnings reports from key players like Automatic Data Processing (ADP - Free Report) , Waste Management (WM - Free Report) and Republic Services (RSG - Free Report) . While ADP will report first-quarter fiscal 2019 on Oct 31, Waste Management and Republic Services will release third-quarter 2018 results on Oct 25.

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