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Accenture Poised To Benefit From IT Outsourcing Upswing

Posted on Tuesday, Oct 4th 2011

A recently released study by IDC, “U.S. BPO Contract Analysis 2006–2010 by Vertical,” revealed that during the five-year period, BPO contract values soared in 2008 and have since declined because of the recession. However, the situation should improve in the coming years. Gartner’s projections state that the ITO market will grow 6.9% over the previous year to end 2011 with revenues of $313.2 billion. The industry is also expected to grow at a compounded rate of 4.6% over 2010–2015. Market leader Accenture is already witnessing such growth.

Accenture’s Financials
Accenture’s (NASDAQ:ACN) Q4 revenues of $6.7 billion grew 23% over the year and were above the Street’s target of $6.5 billion. EPS of $0.91 was also ahead of the market’s target of $0.89. Revenues grew 18% over the year to $25.51 billion with net income growing 28% to $3.40 per share.

During the quarter, Accenture repurchased 13.1 million shares for $731 million.

For 2012, Accenture expects revenues to grow to $27.3 billion-$28.0 billion with EPS of $3.80-$3.88. The market was looking for revenues of $27.5 billion with EPS of $3.78. The company also raised its semiannual dividend by 50% to $0.675 per share and approved $5 billion of share repurchase.

Accenture’s Operating Metrics
During the year, Accenture hired 70,000 people to end it with a global headcount of 236,000. The Global Delivery Network grew from 116,000 to 141,000 people. In Q4, utilization remained flat sequentially at 85%, while attrition, excluding involuntary terminations, fell marginally to 14% compared with 15% a quarter ago.

Accenture’s Acquisitions
Accenture recently expanded its presence in the banking and insurance sector through acquisitions. In July, the company acquired Duck Creek Technologies, a privately held software solutions provider that focuses on the property and casualty insurance industry. Founded in 2000, Duck Creek boasts of more than 60 clients in North America and the UK. The acquisition will help strengthen Accenture’s capabilities to support insurers by giving them an industry-leading suite of software by providing an end-to-end solution to cater to underwriting spanning claims and policy administration.

Within banking, the company announced plans to acquire Zenta, which is among the largest residential and commercial mortgage processors in the U.S. Dallas-based mortgage outsourcer Zenta serves four of the five largest banks in the U.S. and is among the largest providers of real estate accounting and capital market analytics to institutional investment managers, owners and operators, and investment banks. Accenture plans to use the acquisition to retool and streamline operations focused on helping lenders and servicers.

The stock is trading at $51.62 with a market capitalization of $35.92 billion. It touched a 52-week high of $63.66 in July of this year.


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