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Accenture (ACN) Q2 Earnings Surpass Estimates, FY19 View Up

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Accenture plc (ACN - Free Report) reported impressive second-quarter fiscal 2019 results, wherein both earnings and revenues surpassed the Zacks Consensus Estimate.

The stock gained significantly in the pre-market trading, courtesy of the company’s bullish guidance for fiscal 2019. Management raised anticipated EPS range to $7.18-$7.32 from 7.01-$7.25 anticipated earlier. The mid-point of the raised guidance ($7.25) is above the Zacks Consensus Estimate of $7.21 for the period. Revenues are expected to register 6.5-8.5% growth, in terms of local currency, compared with 6-8% growth rate as expected previously.

Earnings of $1.73 per share surpassed the consensus estimate by 16 cents and came ahead of the year-ago figure by 15 cents. The bottom line benefited from higher revenues and operating results, lower non-operating expense and lower share count. These were, however, partially offset by a higher effective tax rate.

Net revenues of $10.45 billion outpaced the consensus mark by $167.4 million and increased 5% year over year on a reported basis and 9% in terms of local currency. Net revenues came above the management’s guided range of $10.10-$10.40 billion.

Over the past year, shares of Accenture have gained 13% compared with 15% rise of the industry it belongs and 8.1% increase of the Zacks S&P 500 composite.

 

Revenues in Detail

On the basis of type of work, Consulting revenues (55% of net revenues) of $5.79 billion increased 6% year over year on a reported basis and 9% in terms of local currency. Outsourcing revenues (45%) of $4.67 billion increased 5% year over year on a reported basis and 9% in terms of local currency.

Among the operating segments, Communications, Media & Technology revenues (20% of net revenues) of $2.15 billion increased 8% year over year on a reported basis and 12% in terms of local currency. Financial Services revenues (20%) of $2.05 billion decreased 2% year over year on a reported basis but improved 2% in terms of local currency. Health & Public Service revenues (16%) of $1.71 billion increased 1% year over year on a reported basis and 3% in terms of local currency. Products revenues (28%) of $2.91 billion increased 6% year over year on a reported basis and 10% in local currency. Resources revenues (16%) of $1.64 billion increased 17% year over year on a reported basis and 22% in terms of local currency.

Geographically, revenues from North Americas (45% of net revenues) of $4.75 billion increased 8% year over year on a reported basis as well as in terms of local currency. Revenues from Europe (35%) of $3.63 billion increased 1% year over year on a reported basis and 7% in terms of local currency. Revenues from Growth Markets (20%) of $2.07 billion increased 9% year over year on a reported basis and 16% in terms of local currency.

Accenture PLC Revenue (TTM)

 

Accenture PLC Revenue (TTM) | Accenture PLC Quote

Booking Trends

Accenture reported new bookings worth $11.8 billion. Consulting bookings and Outsourcing bookings totaled $6.7 billion and $5.1 billion, respectively.

Operating Results

Gross margin (gross profit as a percentage of net revenues) for the second quarter of fiscal 2019 increased 30 basis points (bps) to 29.2%. Operating income was $1.39 billion, up 7% year over year. Operating margin for the reported quarter expanded 20 bps to 13.3%.

Accenture PLC Price, Consensus and EPS Surprise

 

Accenture PLC Price, Consensus and EPS Surprise | Accenture PLC Quote

Balance Sheet & Cash Flow

Accenture exited second-quarter fiscal 2019 with total cash and cash equivalents balance of $4.46 billion compared with $4.36 billion at the end of the prior quarter. Long-term debt was $19.8 million compared with $19.9 million at the end of the prior quarter.

Cash provided by operating activities crossed $1.36 billion in the reported quarter. Free cash flow came in at $1.22 billion.

Dividend Payment

Accenture declared a semi-annual cash dividend of $1.46 per share for its shareholders of record at the close of business on Apr 11, 2019. The dividend will be paid on May 15, 2019.

Combined with the semi-annual cash dividend of $1.46 per share paid on Nov 15, 2018, the total cash dividend payment for the fiscal year will be $2.92 per share.

The company plans to pay dividends on a quarterly basis from the first quarter of fiscal 2020.

Share Repurchases

In line with the policy of returning cash to its shareholders, Accenture repurchased 6.7 million shares for $1.01 billion in the fiscal second quarter. The company had approximately 639 million total shares outstanding as of Feb 28, 2019.

Guidance

Third-Quarter Fiscal 2019

For third-quarter fiscal 2019, Accenture expects revenues to be in the range of $10.80- $11.10 billion, which reflects 5.5-8.5% growth in local currency. The assumption is inclusive of a negative foreign-exchange impact of 4.5%. Notably, the Zacks Consensus Estimate of $11.05 billion lies within the current guided range.

Fiscal 2019

Accenture updated its guidance for fiscal 2019. The company continues to expect negative foreign-exchange impact of 3% on its results in U.S. dollars.

Operating margin for the fiscal year is still expected in the range of 14.5-14.7%, indicating an expansion of 10-30 basis points from fiscal 2018.

Operating cash flow is anticipated in the range of $5.85-$6.25 billion compared with $5.75-$6.15 billion projected earlier. Free cash flow is expected in the $5.2-$5.6 billion band compared with the previously guided range of $5.1-$5.5 billion.

Annual effective tax rate is expected to be 22.5-23.5% compared with 23-25% anticipated earlier.

Zacks Rank & Upcoming Releases

Accenture currently 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 Zacks Business Services sector are keenly awaiting first-quarter 2019 earnings reports from key players like Republic Services (RSG - Free Report) , Waste Management (WM - Free Report) and Waste Connections (WCN - Free Report) .  While Waste Connections will release earnings on Apr 24, Republic Services and Waste Management will report on Apr 25.

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