Accenture plc (NYSE:ACN) shareholders are probably feeling a little disappointed, since its shares fell 10.0% to US$150 in the week after its latest quarterly results. Revenues were US$11b, approximately in line with expectations, although statutory earnings per share (EPS) performed substantially better. EPS of US$1.91 were also better than expected, beating analyst predictions by 10%. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Accenture after the latest results.
Following last week's earnings report, Accenture's 24 analysts are forecasting 2020 revenues to be US$44.5b, approximately in line with the last 12 months. Statutory earnings per share are expected to decrease 2.5% to US$7.61 in the same period. In the lead-up to this report, the analysts had been modelling revenues of US$46.1b and earnings per share (EPS) of US$7.86 in 2020. It's pretty clear that pessimism has reared its head after the latest results, leading to a weaker revenue outlook and a minor downgrade to earnings per share estimates.
It'll come as no surprise then, to learn thatthe analysts have cut their price target 13% to US$191. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values Accenture at US$240 per share, while the most bearish prices it at US$156. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await Accenture shareholders.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. These estimates imply that sales are expected to slow, with a forecast revenue decline of 0.4%, a significant reduction from annual growth of 8.3% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 11% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Accenture is expected to lag the wider industry.
The Bottom Line
The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider industry. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have forecasts for Accenture going out to 2024, and you can see them free on our platform here.
We don't want to rain on the parade too much, but we did also find 1 warning sign for Accenture that you need to be mindful of.
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