Accenture (ACN) Q2 Earnings: What To Expect

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Accenture (ACN) will report second quarter fiscal 2022 earnings results before the opening bell Thursday. Despite firing on all cylinders with revenues and profits, which have risen strongly over the past several quarters, ACN hasn’t avoided the punishment that has ravaged the software sector.

The stock has fallen 10% over the past month, including 25% year to date, compared to 10% decline in the S&P 500 index. A leading specialist in the IT consulting and outsourcing space, Accenture has a business that has benefited immensely from the rapid growing demand not only for IT services, but also from increased cloud adoption and digital transition. The company’s consulting projects, which make up roughly 55% of total revenues, cover areas such as strategy and broad fields including blockchain, technology and digital transformation.

Accenture’s business has benefited immensely from the rapid growing demand not only for IT services, but also from increased cloud adoption and digital transitions. While there is some evidence to suggests IT spending has improved, there’s also the concern of a massive pull-forward that has already occurred. The company has to convince the Street that not only can it sustain its current growth rate, but that growth rate can accelerate profitably. Its guidance on Thursday will be looked upon to assess whether (and how soon) its stock price can rebound.

For the quarter that ended February, Wall Street expects Accenture to earn $2.37 per share on revenue of $14.65 billion. This compares to the year-ago quarter when earnings came to $2.03 per share on revenue of $12.09 billion. For the full year, ending August, earnings are projected to be $9.70 per share, up 24% from $7.80 a year ago, while full-year revenue of $55.11 billion will rise 23% year over year.

Accenture’s management team, which has raised guidance on multiple occasions over the past few quarters, continues to execute on their stated objectives, finding ways to leverage the digitalization trend and increased company’s competitive scale. The company recently announced the formation of Accenture Cloud First, spending some $3 billion over three years, strategically positioning the company for sustained IT spending across all industries.

The company’s investments aligns with predictions from research firm Gartner which forecasts IT spending growth “will continue through 2025, predicting organizations will increase their reliance on external consultants.” Beyond its consulting projects, Accenture also relies heavily on its other segments, which includes accounting, procurement and application services. As noted, these collective businesses are growing impressively and have lead to five straight earnings beats.

In the fiscal first quarter, its revenue grew 27% year over year, accelerating from previous two quarters by six percentage points and three percentage points, respectively. Operating income increases 29% to $2.43 billion, with operating margin of 16.3%, an expansion of 20 basis points. New bookings, a closely-watched metric which measures the strength of future revenue rose 30% year over year to $16.8 billion. Just as impressive, consulting bookings and outsourcing bookings, which came in respectively at $9.4 billion and $7.4 billion were company records.

Not expecting any fundamental disruptions, the management team raised the full-year guidance calling for fiscal 2022 revenue growth of 19% to 22%, above the prior expectation for 12% to 15% growth. On Thursday investors will want to see Accenture improve on these metrics, demonstrating not only the level of confidence the company has about its market position, but also how cheap the stock has become.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.



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