Accenture Confirms My Confidence

The global outsourcing and consulting giant, Accenture (ACN), reported Q4 earnings yesterday, beating analysts’ expectations and supporting their position at the head of my Top 10 Outsourcing Stocks list.

Accenture reported a 17% increase in revenues over the year to clock $6.0 billion for the quarter. Sequentially, revenues were marginally down from $6.1 billion reported earlier. For the year, revenues grew by 19% to $23.4 billion. 

During the quarter, Consulting revenues grew 19% to $3.6 billion and Outsourcing revenues grew 15% to contribute $2.4 billion. For the year, Consulting revenues of $14.1 billion recorded 19% growth  while Outsourcing revenues grew 18% to $9.3 billion.

In the quarter, revenues from the Americas and EMEA grew 17% for each region while Asia Pacific revenues were up 24%.

EPS for the quarter of $0.67 grew 34% over the year and beat the Street’s expectations by a cent. For the year, EPS stood at $2.65, recording growth of 36%.

The company spent $609 million in the quarter to repurchase 15.2 million shares at an average price of $40.16 per share. For the full year they repurchased 60.8 million shares for approximately $2.3 billion at an average price of $37.20 per share. They also announced a dividend of $0.50 per share in the quarter.

They expect to retain the 9-12% growth trend, with bookings of $26-$29 billion for the year and EPS of $2.85-$2.93. For the coming quarter, they expect revenues in the range of $6.15-$6.35 billion.

Accenture is able to use the economic challenges to its benefit. Their global delivery model, which focuses on low-cost delivery centers, and their ability to handle multiple processes, applications, and infrastructure outsourcing, has served them well. The company is able to offer outsourcing solutions to the financial services sector, which is looking to cut costs through outsourcing. Accenture’s technology consulting practice saw good growth as there was increased demand for systems integration and ERP solutions. 

Since Accenture has much more than plain labor arbitrage to offer as an outsourcer, it is best suited to compete with the various low-cost IT firms. Today, most companies are spending their IT budgets on transformational projects with focus on strategic use of technology. Accenture is one of the few companies that is able to offer this, thanks to the investments they have been making in building these capabilities.

Accenture continued to acquire companies during the quarter and concluded the acquisition of George Group, a management consulting firm focused on driving performance improvements through strategic process improvements, accelerated innovation, and streamlined operations.

For the coming year, Accenture plans to implement a three-pronged strategy. First, the company will remain focused on operational priorities through improving differentiation through industry programs and assets, and improving cost to serve. Second, they will closely manage the business to cater to the uncertain markets. Finally, they will continue to regard the challenging economic environment as an opportunity to help clients improve performance and transform their businesses.

The stock rose 1.6% in the after-hours session to close at $37.17. Earlier last week, it reached a new 52-week high of $43.04.