Will The Government Shutdown Impact Accenture’s Q2 Federal Revenues?

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Accenture

Accenture (NYSE:ACN) serves U.S. government clients through the company’s fully-owned U.S. subsidiary, Accenture Federal Services. Accenture’s Federal revenues are booked in the company’s Health & Public Service (H&PS) division and accounted for around 34% of the division’s revenue in fiscal 2018.

We note that the contribution of the Federal business as a percentage of H&PS division revenue has been seeing a decline since 2017, and expect 2019 to further this trend, with Federal contribution to HP&S revenue declining to 32%.

Our interactive dashboard on Federal Business Contribution To Accenture details our estimates for the business. You can modify any of our key drivers to gauge the impact changes would have on the company’s results, and see all of our Information Technology company data here.

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Accenture has been witnessing continued pressure in its U.S. Federal business, owing to the business undergoing a cyclical decline as contracts have been nearing completion. In Q1, the company’s management noted that the weakness in the U.S. Federal business was the key reason for modest growth in North America and the broader H&PS segment. In fact, the management noted that excluding the U.S. federal business, H&PS was growing almost close to 10% y-o-y.

We note that the cyclical weakness is likely to overshadow the impact of the government shutdown to Accenture’s Federal business, though the shutdown may have had a minor impact on fiscal Q2 revenues, which have yet to be reported. Further, the company notes that the contracts winding down will likely give way to further growth once the contracts are up for renewal.

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