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Accenture Benefits from Very Strong Outsourcing Growth

Posted on Thursday, Apr 5th 2012

According to research firm Information Services Group, for the quarter ended December 2011 markets saw strong growth in global outsourcing contracts. The total contract value (TCV) of contracts executed during the period grew 7% over the year to $26.4 billion. Growth was led by deals in the business process outsourcing (BPO) space and in the European, Middle East and Africa (EMEA) markets. The TCV of contracts in 2011 grew 3% to $95 billion, the biggest increase since 2005. EMEA markets helped drive growth as full-year TCV for the region grew 27% to $55 billion. By segment, BPO contracts grew 32% over the year to $29 billion for the year 2011. However, contracting activity within the IT outsourcing (ITO) segment fell 6% over the year to $66 billion.

Accenture’s Financials Show Growth Across the Board
Leading outsourcing solutions provider Accenture’s (Nasdaq:ACN) performance continued to surpass market expectations. Q2 revenues grew 12% over the year to $6.8 billion, beating the market’s expectations of $6.65 billion. EPS of $0.97 grew 27% over the year and was also ahead of the Street’s target of $0.86.

By segment, consulting revenues grew 7.6% to $3.8 billion and outsourcing revenues reported impressive 18.8% growth to $3 billion. In terms of region, revenues from America grew 13% over the year. Despite Europe’s depressed market conditions, Accenture’s revenues from Europe grew 8% over the year. The emerging markets of EMEA and Asia Pacific grew 23.4% over the year.

During the quarter, Accenture repurchased 8.6 million of its shares at $465 million.

For the current quarter, Accenture projected revenues of $7.05 billion-$7.25 billion. They expect to end the year with revenue growth of 10%-12% in local currency terms, ahead of the earlier projected growth of 7%-10% for the year. The year’s EPS is projected at $3.82-$3.90, ahead of the Street’s projections of $3.82.

Their operating metrics remained impressive, with utilization remaining flat sequentially at 87%. Attrition was also flat for the quarter at 12% and was lower than the 14% reported a year ago. They added more than 2,000 employees during the quarter, ending it with a global headcount of more than 246,000. They are on track to hire more than 60,000 employees this year.

Accenture Acquires to Move into Iberian and Latin Markets
Earlier this quarter, Accenture announced the acquisition of Neo Metrics S.L., a Spain-based consulting firm specializing in optimization and predictive analytics. Neo Metrics’s solutions are used to develop analytical models that help organizations get insight into and predict customer behavior. Through the acquisition, Accenture believes it will improve social network analysis capabilities to help deal with growing online customer communities. In addition, Accenture will be able to leverage Neo Metric’s dominance in Spain, Portugal, and Latin America to expand their own global footprint. They will work together to develop advanced analytical models spanning industries and business functions, including pricing optimization, quality management, fraud management, and demand forecasting.

Their stock is trading at $64.50 with a market capitalization of $41.57 billion. It touched a 52-week high of $65.89 earlier last week as the market reacted positively to their results announcement.

 

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