Accenture beats estimates as digital investments pay off

Accenture beat estimates for quarterly earnings and raised its full-year profit forecast on Thursday as it continues to benefit from investments in digital and cloud services, sending its shares 4 per cent higher.

Much of Accenture’s recent growth has been driven by digital and cloud services, which include everything from managing clients’ social media marketing strategies to helping them migrate to the cloud. The services made up more than 60 per cent of its total revenue in the second quarter.

Wedbush analyst Moshe Katri said Accenture’s beat and raise reflect a very bullish spending environment for the IT services sector.

“This is driven by large digital transformation programmes at enterprises as well as by a ‘catch-up’ in spending on legacy, rationalisation projects”.

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Accenture competes with Cognizant as well as with major Indian IT companies such as Tata Consultancy Services and Wipro.

Accenture, which has spent billions of dollars over the recent years on acquisitions to strengthen its business, said on Thursday it still expects to spend up to $1.5 billion (€1.34bn) on deals during fiscal 2019. It has already made at least three small acquisitions this year.

The company’s operating costs rose 5.3 per cent in the second quarter, but gross margins climbed to 29.2 per cent from 28.9 per cent.

The consulting and outsourcing services provider hiked its full-year earnings per share forecast range to $7.18-$7.32, from $7.01-$7.25.

The company’s revenue rose 5.5 per cent to $10.45 billion, ahead of estimates of $10.30 billion, according to IBES data from Refinitiv.

In the quarter ended February 28th, net income attributable to the company rose 30 per cent. On a per share basis, Accenture earned $1.73 a share. Analysts on average had expected a profit of $1.57 a share.

Accenture, which is looking for a new chief executive officer after Pierre Nanterme stepped down due to health reasons in early January, said it expects to name an internal candidate as the new chief by the end of this fiscal year.

Up to Wednesday’s close, shares of the company had risen more than 18 per cent this year, 1 per cent below the gains of the S&P 500 IT Consulting & Other Services index. – Reuters