Accenture Reports Strong Q1 Earnings, Looks Poised for Growth

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Accenture

On Thursday Accenture (NYSE:ACN) reported strong results with the highest ever quarterly revenues of $7.1 billion for the Q1 of fiscal 2012, an increase of 17 percent over the same period last year. The consulting and outsourcing major witnessed double-digit growth in its all five operating groups and all three geographic regions. Accenture also generated strong new bookings of $7.8 billion for the quarter and looks well on track to clock in $30 billion of new bookings for the full fiscal as the global economy remains in bad shape. (See Why Accenture Profits from a Bad Economy)

Our updated estimate is near $60 for Accenture.

See our full analysis on Accenture

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Strong Revenue Growth Continues

As we expected in our Accenture earnings preview earlier, the company saw strong revenue growth in the quarter which was driven by strong new bookings in the fourth quarter of fiscal 2011. It reported solid revenue growth in both its consulting and outsourcing business segments. Consulting net revenues came in at $4.1 billion, an increase of 14 percent over the first quarter of fiscal 2011. Outsourcing net revenues were $3.0 billion, up 21 percent year over year.

With economy in doldrums, markets changing dynamically and organizations facing increased challenges to sustain profitably, we believe Accenture’s revenue growth will remain strong going forward and could even out do the firm’s estimate of 7 percent to 10 percent growth for the fiscal 2012.

Higher Margin and Utilization Rate, Lower Attrition

Accenture earnings displayed the firm’s strengthening operations as it was able to improve its margins and utilization rate as well as reduce its attrition rate.

The company’s operating income during the quarter was $981 million, an increase of 19 percent over the same period last year. Operating margin was 13.9 percent, a year-over-year expansion of 20 basis points. The 40 basis point decrease in gross margin was more than compensated by 60 basis point decrease in S&M and G&A costs combined.

Utilization rate for the quarter was 87 percent, up from 85 percent in Q4 last fiscal, even as the company increased its headcount to 244,000 at quarter end. On the other hand, attrition for the first quarter of fiscal 2012 was down to 12 percent, compared with 14 percent for the fourth quarter of fiscal 2011 and 15 percent for the first quarter of fiscal 2011.

All these highlight that Accenture is executing its growth strategy with great operational efficiency. At current market rates, the stock is looking attractive.

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