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Accenture (NYSE:ACN) posts fiscal Q3 earnings and revenue beats, raises FY2019 guidance

  • $1.93 EPS and $11.1B revenue up Y/Y
  • $1.72B operating income (+5% Y/Y), $10.6B in new bookings
  • Expects $7.28-$7.35 EPS and 8-9% revenue growth in FY19

Accenture (NYSE:ACN) said it was “very pleased” with its performance during fiscal Q3 and hailed the “strength and consistency” of its business after posting top and bottom line beats and raising its guidance for FY2019.

The global management consulting and professional services enterprise delivered $1.93 EPS for the three-month period ending May 31, 2019, which was a healthy 33 cent rise on the comparable period in 2018 and 4 cents up on the Wall Street consensus. Revenue also jumped 3.8% year-over-year to $11.1 billion versus the $11.03 billion pre-report estimates.

Accenture’s latest beats continue a pattern of overdelivering on earnings as the company has now surpassed estimates in every quarter during the last twelve months. Back in Q2, it booked $1.73 EPS compared to the $1.57 forecasts.

Despite the strong showing, shares were trading lower following the release of the report as investors honed in on a weakness in bookings, which fell during fiscal Q3. Cowen analyst Bryan Bergin believes the drop-off was not wholly surprising as ACN logged “robust” bookings in Q2 when performance soared 20% Y/Y.

Bergin reiterated his Outperform rating and $190 price target late last week and the bullish sentiment falls in line with Accenture’s Overweight rating consensus. There are currently 15 Buy, 1 Overweight and 6 Hold ratings compared to 1 Underweight and 2 Sell positions. The average price target is $191.73, a $7 upside on Friday’s close.

Accenture also noted on Friday that its European business, which is second only to the US in terms of client numbers, was less successful during Q3. The business generated $3.77 billion in revenue, down from the $3.88 billion figure from a year ago.

In a statement, CEO David Rowland said he was pleased with overall performance and the “continued momentum” shown. He added: “With revenue growth of 8.4 percent in local currency, we again gained significant market share. We also delivered strong profitability, generated outstanding free cash flow and returned $1.4 billion in cash to our shareholders.”

Gross margin in Q3 widened slightly from 31.2% to 31.8%, and operating cash flow increased to $2.12 billion. Meanwhile, $6.24 billion revenue came from Accenture’s Consulting business and $4.68 billion from Outsourcing.

The Dublin-based company raised its guidance for Q4 and the full fiscal year on the back of the Q3 beats. It now expects revenue to come in at $10.85 to $11.15 billion in Q4 and for there to be high single-digit growth for FY2019. EPS is tipped to fall somewhere between $7.28 and $7.35.

Rowland concluded: “Our substantial investments in strategic, high-growth areas are clearly differentiating us and driving growth ahead of the market. We remain confident in our ability to continue delivering profitable growth and significant value for our clients and shareholders.”