Accenture Results: Order Book Strengthens Suggesting Strong Demand For Outsourcing And Consulting

Dec 23 2013, 4:48pm CST | by

Accenture Results: Order Book Strengthens Suggesting Strong Demand For Outsourcing And Consulting
Photo Credit: Forbes Business

Accenture reported its Q1 FY 2014 results on December 19. The company once again delivered strong numbers as revenues grew by 3% in constant currency to $7.4 billion. Accenture’s operating margin increased marginally to 14.8% in Q1 compared to 14.5% at the same time last year, leading to operating income of $1.09 billion. The company also reported higher diluted earnings per share to $1.15.

In our article published earlier, we stated that we expected outsourcing revenues to outpace the industry in the first quarter. We also expected consulting revenues to remain flat. The company result was in line with our expectation as the outsourcing revenue grew 6% year over year in constant currency to $3.42 billion, while the consulting business revenues were flat at $3.94 billion. Furthermore, as per our expectations, the company reported a strong order pipeline, and booked new orders worth $8.7 billion in Q1 FY14.

See our full analysis on Accenture

Maintains Revenues Guidance For FY14

Accenture expects net revenues for fiscal 2014 to grow in 2% to 6% range (with a midpoint of $29.70 billion) and GAAP operating profit margins to improve to 14.3% to 14.5% range. However, it expects a mild improvement in diluted EPS, which will now be in the $4.44 to $4.56 range. The company continues to target new bookings for fiscal 2014 in the range of $32 billion to $35 billion. In the outlook for Q2 2014, Accenture expects revenues to range from $6.95 – $7.25 billion.

Outsourcing Revenues Outpace Industry

According to our estimates, the outsourcing division contributes approximately 40% to Accenture’s value. This division continued to outpace the outsourcing industry as revenues grew by 6% to $3.42 billion. Additionally, Accenture continued to report strong demand for its outsourcing services with new bookings at $4.4 billion. However, the book-to-bill ratio, which indicates the dollar amount of new order received for every dollar amount of revenue billed, declined by 10 basis points sequentially to 1.3. Still orders outpaced billings by 30%. Considering this strong order pipeline, we expect that Outsourcing will continue to deliver growth in Q2 as well.

Stronger Than Expected Orders For Consulting

Management and technology consulting are important drivers for Accenture’s value and account for around 40% of our price estimate combined. While the revenues for the divisions were flat at $3.94 billion, the company reported momentum in new orders that will result in low single-digit growth in Q2, according to their guidance.

During the quarter, the company booked $4.3 billion in new orders for the consulting business. The book-to-bill ratio, the key metric that ascertains the growth in new contracts (as we noted above), improved to 1.1. The company also reported that it is witnessing mild recovery in orders from EMEA and Asia, which may help the consulting division to post growth in the coming quarters. If IT spending, across the world, were to improve, we can expect the company to post mid single-digit growth.

Focus on New Business Intensifies

The company launched two new platforms, Accenture Digital and Accenture Strategy, earlier this month. These platforms will focus on social media, mobile computing, analytics and the cloud domain. The company has reiterated that it is planning to acquire companies to bolster revenues from these new platforms. While these businesses not only garner high margins, they also have exceptionally high growth rates as widespread adoption of Internet and cloud services prevails. Therefore, we expect these new platforms to be a key driver for growth going ahead.

We are in the process of upgrading our Accenture model. At present, we have a $74.06 Trefis Price Estimate for Accenture which 8% below its current market price.

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

Like our charts? Embed them in your own posts using the Trefis WordPress Plugin.

Source: Forbes Business

 
 

Don't miss ...

 

<a href="/latest_stories/all/all/30" rel="author">Forbes</a>
Forbes is among the most trusted resources for the world's business and investment leaders, providing them the uncompromising commentary, concise analysis, relevant tools and real-time reporting they need to succeed at work, profit from investing and have fun with the rewards of winning.

 

blog comments powered by Disqus

Latest stories

Bryan Singer Accusation Raises Uncomfortable Questions About Which Movies We Choose To See
Bryan Singer Accusation Raises Uncomfortable Questions About Which Movies We Choose To See
No film is getting more publicity right now than X-Men: Days of Future Past. The Fox franchise has been the lowest earner of the Marvel series with no individual movie earning more than $500 million at the box office....
 
 
Sabre, Weibo Jump Through Closing IPO Window
Sabre, Weibo Jump Through Closing IPO Window
The two-year anniversary of Facebook’s 2012 IPO is just a month away, and if recent trends continue the demand for new offerings may start resembling the freeze that followed the social network’s debut. After that...
 
 
Russia Recession Not Out Of The Question
Investors won’t be surprised if the Market Vectors Russia (RSX) exchange traded fund wipes out Thursday’s nice 6.15% pop in the days head, as economic data out of Russia points to a slowdown. Or even worse: a recession...
 
 
How To Use A Secured Card To Rebuild Your Credit
Who among us hasn’t needed a second chance? Or a first opportunity? For the millions of Americans who were battered by the Great Recession and came out of it with a tattered credit score, plus the legions of young...
 
 
 

Latest from the Network

Bryan Singer Accusation Raises Uncomfortable Questions About Which Movies We Choose To See
No film is getting more publicity right now than X-Men: Days of Future Past. The Fox franchise has been the lowest earner of the Marvel series with no individual movie earning more than $500 million at the box office....
Read more on Business Balla
 
Sabre, Weibo Jump Through Closing IPO Window
The two-year anniversary of Facebook’s 2012 IPO is just a month away, and if recent trends continue the demand for new offerings may start resembling the freeze that followed the social network’s debut. After that...
Read more on Business Balla
 
Russia Recession Not Out Of The Question
Investors won’t be surprised if the Market Vectors Russia (RSX) exchange traded fund wipes out Thursday’s nice 6.15% pop in the days head, as economic data out of Russia points to a slowdown. Or even worse: a recession...
Read more on Business Balla
 
Janet Yellen's Lunchtime Speech -- The Market Heard a Dove, But That Wasn't the Message
At some point during Chair Yellen’s tenure people will likely begin to see the pragmatic central banker she has been. Wednesday’s luncheon speech to the Economic Club of New York was a step in that direction, once...
Read more on Auto Balla
 
Aereo CEO speaks on future of company, industry
NEW YORK (AP) — The future of Aereo, an online service that provides over-the-air TV channels, hinges on a battle with broadcasters that goes before the U.S. Supreme Court next week. For as little as $8 a...
Read more on Apple Balla
 
How To Use A Secured Card To Rebuild Your Credit
Who among us hasn’t needed a second chance? Or a first opportunity? For the millions of Americans who were battered by the Great Recession and came out of it with a tattered credit score, plus the legions of young...
Read more on Business Balla
 
An Egypt Expert Doesn't Share IMF's Hopeful View
Before you think that Gen. Abdul-Fatah al-Sisi’s booting of the Muslim Brotherhood from power and legitimacy in Egypt has restored a sort of Mubarak-y order, consider this week’s grim report:  The senior fellow for the...
Read more on Business Balla
 
Why Brazil's Unemployment Rate Is So Low
The unemployment rate can baffle a Brazil watcher.  How can the economy be growing at its lowest level since the credit crisis of 2008-09, yet unemployment continue to decline. On Wednesday, Brazil’s unemployment...
Read more on Business Balla
 
Social Security's Proper Role In Your Retirement Plan
Could you live on Social Security? That seems to be a stock answer for many folks nearing retirement, and it’s a tremendously misguided view. According to the Social Security Administration’s latest statistical snapshot...
Read more on Business Balla
 
Kinder Morgan Energy Partners Named Top Dividend Stock With Insider Buying and 6.95% Yield (KMP)
In this series, we look through the most recent Dividend Channel ”DividendRank” report, and then we cherry pick only those companies that have experienced insider buying within the past six months. The officers and...
Read more on Business Balla
 
 
Auto Balla Sexy Balla Sport Balla TV Balla Politics Balla Movie Balla Apple Balla Business Balla Ad Balla Celebrity Balla