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Accenture tamps down forecast, stock takes a dive

The Associated Press

NEW YORK (AP) -- Shares of consulting firm Accenture PLC plunged in early trading Friday, after the company announced that it was lowering its predictions for both revenue and profit.

THE SPARK: Accenture reported late Thursday that its profit and revenue were both up in the fiscal third quarter, but investors latched on to the bad news. The revenue gain was slight — only about 1 percent — and fell short of what analysts had expected. And while there was some strength in its outsourcing business, Accenture noted that it didn't make as much from consulting as it had expected.

Its outlook disappointed. For the current quarter, which runs through August, Accenture said it expects revenue of $6.7 billion to $7 billion, less than the $7.4 billion that analysts polled by FactSet had been predicting. The company also lowered its predictions for adjusted annual earnings to $4.18 to $4.22 per share, down from its previous forecast of $4.24 to $4.32 per share, and below the $4.30 per share forecast from Wall Street.

THE BIG PICTURE: Accenture does consulting and outsourcing for companies in a broad range of industries, including banks, cell phone makers and hotels. It can help companies with any number of tasks, like sprucing up their websites or making sure they comply with new laws.

Revenue was hurt by lower demand in Europe as well as the communications, media and technology division.

THE ANALYSIS: Jefferies analyst Jason Kupferberg called the revenue miss surprising and said that managers' tone about demand had "worsened considerably." He noted that Accenture's consulting revenue, which shrunk 2 percent in the recent quarter, was slowing, while other firms' consulting revenue was growing. "While one year doesn't make a trend," he wrote in a note to clients, "it's hard to not be somewhat concerned by the recent pattern."

Other analysts noted the positives. Citigroup's Ashwin Shirvaikar noted the strength in outsourcing, where revenue grew 4 percent, and thought North America and digital marketing would help fuel future growth. Susquehanna analyst James Friedman said the new immigration bill would allow Accenture to hire more workers who are on visas.

SHARE ACTION: The stock dropped $10.45, or 13 percent, to $69.77 in Friday morning trading. Shares have changed hands between $5.34 and $84.22 in the past 52 weeks, and ended Thursday up about 18 percent in the first half of the year.