Accenture Earnings Preview: What We’re Watching

by Trefis Team
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Quick Take

  • Accenture is set to announce its Q3 FY 2013 results on June 27. While its outsourcing revenues have driven revenue growth in the past quarter, consulting division results to be in focus, as we expect it to contribute meaningfully to the company’s growth in Q3 and beyond.
  • New business offerings in social media, mobile computing, analytics and the cloud will improve margins in 2013 and beyond.

Accenture (NYSE:ACN) is set to announce its Q3 FY2013 results on June 27, 2013. The company reported 4% y-o-y increase in revenues to $7.1 billion in Q2. The outsourcing business has helped the company sustain the downturn in Europe during the last two quarters. However, the consulting business has shown a slight decline in the previous quarters. In this earnings announcement, we will be closely monitoring the growth in the consulting business, as it will give us a fair indication of whether the division has turned the corner or not. Additionally, Accenture reported a strong pipeline of new booking in the previous quarter. We expect Accenture to continue to deliver revenue growth due to strong order pipeline in outsourcing and consulting.

See our full analysis on Accenture

Outlook For Q3 2013

In the outlook for Q3 2013, Accenture expects revenues to range from $7.25 – $7.5 billion. The company expects bookings for 2013 to be in the range of $31-$34 billion, and EPS to fall between $4.24 – $4.32 for FY13. Additionally, Accenture has given a revenue growth guidance of 5%-8% for second half of 2013, and it expects bookings from the previous quarters to convert into revenues in the second part of the fiscal year. The company has also stated that the conversion from contracts to revenue for consulting is picking up gradually. Considering the long term nature of consulting contracts booked, we expect revenue growth to be at the lower end of this guidance for 2013.

Outsourcing To Deliver Growth in Q3

Consistent double-digit growth in the outsourcing business in the past year has helped the company manage the downturn in Europe. The company booked $4.7 billion worth of fresh contracts in Q2 2013, and we expect that outsourcing revenues will continue to deliver growth in Q3. In this earning announcement, we will be closely monitoring its outsourcing business, as it will give us a fair indication of whether Accenture’s clients have stepped up their IT spend or not. Additionally, we will continue to monitor Accenture’s order backlog for the outsourcing division.

Consulting In Focus In Q3

The consulting business reported revenues of $3.8 billion for Q2 2013, implying a 1% decline annually. In Q2FY13, Accenture booked a record $4.4 billion in new orders for the consulting business. Management and technology consulting are important drivers for Accenture’s value and account for around 46% of our price estimate combined, and as these recover, we expect it to contribute meaningfully to the company’s growth. We expect that revenue from consulting will match our projected growth for consulting in FY13, as the company will book revenue against outstanding contracts in second half of FY13.

New Business Vertical To Drive Growth

Accenture has launched new business ventures in analytics, digital marketing and mobility that will supplement growth at Accenture in the coming quarters. Accenture acquired two new companies in this quarter: Fjord, a UK-based mobility and design marketing company, and Acquity Group, a digital marketing and strategy company, to boost its Interactive Marketing Platform. [1]  Additionally, Accenture formed a strategic alliance with GE to develop application for analyzing big data across its industrial division recently. The offerings include cloud-based, intelligent analytics solutions for monitoring the performance of machines, infrastructure and business processes.

We stated earlier that Accenture’s new business ventures in analytics, digital marketing and mobility will help drive growth in 2013. In its Q2 earnings call, the company guided operating margins will be at 15% for 2013 due to these initiatives. [2] In this earnings announcement, we will want to know whether the growth at these new business ventures is on track or not. Moreover, we will be closely monitoring the earnings for the margins delivered for these new business ventures.

We currently have a $67 Trefis price estimate for Accenture, which is 15% below its current market price.

Understand How a Company’s Products Impact its Stock Price at Trefis

  1. See Accenture Bolsters Its Interactive Marketing Platform With Two Acquisitions []
  2. See Accenture’s Results Show Outlook Steadily Improving []
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