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A month has gone by since the last earnings report for Accenture (ACN). Shares have added about 7.5% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Accenture due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Accenture Surpasses Q2 Earnings & Revenues Estimates
Accenture reported solid second-quarter fiscal 2021 results, wherein earnings and revenues surpassed the Zacks Consensus Estimate.
Earnings of $2.03 per share beat the consensus estimate by 6.4% and improved year over year. The bottom line benefited from higher revenues and operating numbers, and lower share count, partially offset by higher effective tax rate, lower non-operating income and higher income attributable to non-controlling interests.
Revenues of $12.09 billion beat the consensus mark by 3.4% and increased 8% year over year on a reported basis and 5% in terms of local currency. Revenues exceeded the guided range of $11.55-$11.95 billion.
Revenues in Detail
Based on the type of work, Consulting revenues of $6.44 billion increased 4% year over year on a reported basis and 1% in terms of local currency. Outsourcing revenues of $5.65 billion increased 14% year over year on a reported basis and 11% in terms of local currency.
Segment-wise, Communications, Media & Technology revenues of $2.48 billion improved 11% year over year on a reported basis and 9% in terms of local currency. Financial Services revenues of $2.38 billion increased 14% year over year on a reported basis and 10% in terms of local currency. Health & Public Service revenues of $2.26 billion increased 16% year over year on a reported basis and 14% in terms of local currency. Products revenues of $3.34 billion grew 6% year over year in U.S. dollars and 2% in terms of local currency. Resources revenues of $1.63 billion decreased 4% year over year on a reported basis and 7% in terms of local currency.
Geographically, revenues of $5.63 billion from North Americas increased 7% year over year on a reported basis as well as in terms of local currency. Revenues of $4.03 billion from Europe increased 11% on a reported basis and 3% in terms of local currency. Revenues of $2.43 billion from Growth Markets increased 8% year over year on a reported basis and 6% in terms of local currency.
Accenture reported new bookings worth $16 billion, up 13% year over year. Consulting bookings and Outsourcing bookings totaled $8.0 billion each.
Gross margin (gross profit as a percentage of net revenues) for the second quarter of fiscal 2021 decreased 50 basis points (bps) to 29.7%. Operating income was $1.65 billion, up 11% year over year. Operating margin in the reported quarter expanded 30 bps to 13.7%.
Balance Sheet & Cash Flow
Accenture exited second-quarter fiscal 2021 with total cash and cash equivalents balance of $9.17 billion compared with $8.59 billion at the end of the prior quarter. Long-term debt was $59.3 million compared with $59.8 million at the end of the prior quarter.
Cash provided by operating activities crossed $2.53 billion in the reported quarter. Free cash flow came in at $2.44 billion.
On Feb 12, 2021, the company paid out a quarterly cash dividend of 88 cents per share to shareholders of record at the close of business on Jan 14, 2021. These cash dividend payouts totaled $561 million.
The company has declared another quarterly cash dividend of 88 cents per share, to be paid out on May 14, 2021 for shareholders of record at the close of business on Apr 15, 2021.
During second-quarter fiscal 2021, Accenture repurchased 4.6 million shares for $1.18 billion. The company had approximately 636 million total shares outstanding as of Feb 28, 2021.
Third-Quarter Fiscal 2021
For third-quarter fiscal 2021, Accenture expects revenues of $12.55-$12.95 billion. The expectation is inclusive of a positive foreign-exchange impact of 4.5%.
Accenture has raised its guidance for fiscal year 2021. Revenues are now expected to register 6.5-8.5% growth in terms of local currency compared with the prior growth rate of 4-6%.
The company now expects positive foreign-exchange impact of 3% on its results in U.S. dollars compared with the prior foreign-exchange assumption of 2%. Operating cash flow is now anticipated in the range of $7.65-$8.15 billion compared with the prior guidance of $6.65-$7.15 billion. Free cash flow is now expected between $7.0 billion and $7.5 billion, compared with the prior guidance of $6.0 billion to $6.5 billion. The company expects adjusted EPS in the range of $8.32-$8.50 compared with the prior-guided range of $8.02-$8.25. Operating margin for the fiscal year is expected to be between 15.0% and 15.1%, compared with the prior guidance of 14.8% to 15.0%. Annual effective tax rate is anticipated in the range of 23.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month.
At this time, Accenture has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Accenture has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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