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Is Accenture Worthy of Being in Your Portfolio?

April 09, 2014 | About:
tyokunbo

tyokunbo

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Accenture (ACN) is based in Dublin, Ireland. The company combines its capabilities across numerous sectors to deliver tangible results for its clients. Accenture offers management consulting services in diverse segments. It also provides system integration consulting services and solutions. It serves numerous industries, and it has a strategic collaboration with Marriot International.

Business Moat

The company collaborates with some of the giants in the tech segment. In the last quarter, it announced a unique new business model with SAP. Through the newly formed business model, Accenture and SAP will develop integrated industry-specific and cloud-based solutions.

Accenture partnered with Salesforce.com to design a solution for Schneider Electric. The solution will be used by about 26,000 people in 100 countries. The initiative is the largest salesforce implementation in Europe.

Number at a Glance

In the last quarter, Accenture generated revenues of $7.1 billion, a 3% increase in local currency and about the midpoint of the company’s guiding range. Earnings per share were $1.03 compared to $1.0 on an adjusted basis in the second quarter of last year. The company recently announced a semi-annual cash dividend of $0.93 per share. This brings its total dividend payments for the year to $1.86 per share, a 15% increase over last year.

Positive Outlook

Based on its performance for the first half of the year, the company has revised most of its metrics in its business outlook for the third quarter of fiscal 2014. Accenture now expects revenues to be in the range of $7.4 billion to $7.65 billion. It expects its net revenue for the full-year to be in the range of a 3% to 6% growth in local currency. It also expects its full-year earnings per share to be in the range of $4.50 to $4.62. In terms of cash flow, Accenture expects it to be in the range of $2.9 billion to $3.2 billion.

Other Growth Initiatives

One thing that sets Accenture apart is that it combines its capabilities in many sectors to assist clients. Recently, it signed a long-term agreement with Monte dei Paschi di Siena to offer services to enhance its competitiveness. Accenture expects the initiative to boost its revenue.

The company also partnered with Endesa, one of the world’s largest electric power companies. Accenture is supporting the roll-out of more than 13 million smart meters in Spain. The company is facilitating the expansion of smart metering operations and integrating existing billing systems.

Head to Head

Accenture faces a stiff competition from International Business Machines (IBM) and Hewlett Packard (HPQ). However, Accenture has a competitive advantage over rivals. It boasts of a strong booking going into the next quarter. This is fueled by an increasing demand for its systems integration and management consulting solutions.

Wings Across the World

Accenture ended the last quarter with a global headcount of about 289,000 people. The company has around 192,000 in its Global Delivery Network. In other words, it is an organization that spans numerous countries.

A Glance at Europe

The environment in Europe continues to be challenging. Still, Micron was able to sign agreements with Monte dei Paschi di Siena and Endesa. However, the company expects a revenue growth in countries like the U.K, Italy, Germany, and France in the near future.

The Asia Pacific market

Accenture experienced a strong demand for its products and services in the Asia/Pacific region. Consequently, it grew its revenues by 4% in the last quarter.

Conclusion

Accenture, like most prosperous companies, is diversified across many segments. It is therefore able to face the challenges in its business. Overall, it has a very good financial standing and is positioned to show improvements on the international level. I feel bullish that it will continue to provide a pocketful of returns to its investors in the near future.


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Comments

rob24601
Rob24601 premium member - 5 months ago

In his 1988 annual letter Buffett mentions a Fortune magazine study that identified companies who were able to achieve an average return on equity of 20% and also have no individual year in that ten year period where return on equity dipped below 15%. Very few companies met this criteria. In 2012, an article on Motley Fool updated the study and identified companies who met the above criteria for the period 2002-2012, and Accenture was one such company, so I agree, excellent business!

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