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Accenture's (ACN) Q4 Earnings & Revenues Miss Estimates

Accenture plc ACN reported disappointing fourth-quarter fiscal 2020 results, wherein earnings and revenues lagged the Zacks Consensus Estimate.

Earnings of $1.70 per share missed the consensus estimate and fell short of the year-ago figure by 2.3%. The year-over-year decline was due to lower revenues and operating numbers, and higher effective tax rate, partially offset by higher non-operating income, and lower share count.

Net revenues of $10.84 billion missed the consensus mark by 0.7% and decreased 2% year over year on a reported basis and 1% in terms of local currency. Net revenues came within the guided range of $10.6-$11 billion.

So far this year, shares of Accenture have gained 9.5%, outperforming 9.1% increase of the industry it belongs to and 2.9% increase of the Zacks S&P 500 composite.

Revenues in Detail

On the basis of the type of work, Consulting revenues of $5.68 billion decreased 8% year over year on a reported basis as well as in terms of local currency. Outsourcing revenues of $5.15 billion increased 6% year over year on a reported basis and 7% in terms of local currency.

Segment-wise, Communications, Media & Technology revenues of $2.20 billion decreased 2% year over year on a reported basis and were flat in terms of local currency. Financial Services revenues of $2.10 billion decreased 1% year over year on a reported basis and were flat in terms of local currency. Health & Public Service revenues of $2.09 billion increased 11% year over year on a reported basis and 12% in terms of local currency. Products revenues of $2.90 billion decreased 6% year over year on a reported basis as well as in local currency. Resources revenues of $1.54 billion decreased 11% year over year on a reported basis and 10% in terms of local currency.

Geographically, revenues of $5.20 billion from North Americas decreased 1% year over year on a reported basis and were flat in terms of local currency. Revenues of $3.41 billion from Europe decreased 5% on a reported basis as well as in terms of local currency. Revenues from Growth Markets of $2.23 billion decreased 1% year over year on a reported basis but increased 3% in terms of local currency.

Booking Trends

Accenture reported new bookings worth $14 billion, up 8% year over year on a reported basis and 9% in terms of local currency. Consulting bookings and Outsourcing bookings totaled $6.5 billion and $7.5 billion, respectively.

Operating Results

Gross margin (gross profit as a percentage of net revenues) for the fourth quarter of fiscal 2020 increased 70 basis points (bps) to 31.8%. Operating income was $1.54 billion, down 1.9% year over year. Operating margin in the reported quarter expanded 10 bps to 14.3%.

Accenture PLC Price, Consensus and EPS Surprise

Accenture PLC price-consensus-eps-surprise-chart | Accenture PLC Quote

Balance Sheet & Cash Flow

Accenture exited fourth-quarter fiscal 2020 with total cash and cash equivalents balance of $8.42 billion compared with $6.44 billion at the end of the prior quarter. Long-term debt was $54.1 million compared with $60.3 million at the end of the prior quarter.

Cash provided by operating activities crossed $3.16 billion in the reported quarter. Free cash flow came in at $2.97 billion.

Dividend Payout

On Aug 14, 2020, the company paid out a quarterly cash dividend of 80 cents per share to shareholders of record at the close of business on Jul 16, 2020. These cash dividend payouts totaled $509 million.

The company declared a quarterly cash dividend of 88 cents per share, reflecting a dividend hike of 10% for shareholders of record at the close of business on Oct 13, 2020. This dividend will be paid out on Nov 13, 2020.

Share Repurchases

In line with the policy of returning cash to its shareholders, Accenture repurchased 2.6 million shares for $590 million in the fiscal fourth quarter. The company had approximately 635 million total shares outstanding as of Aug 31, 2020.

Guidance

First-Quarter Fiscal 2021

For first-quarter fiscal 2021, Accenture expects revenues of $11.15-$11.55 billion. The assumption is inclusive of a positive foreign-exchange impact of 1.5%.

Fiscal 2021

Accenture expects EPS in the range of $7.80-$8.10. The current Zacks Consensus Estimate of $8.19 lies above the updated guidance.

Revenues are expected to register 2-5% growth in terms of local currency. Operating margin for the fiscal year is expected to be between 14.8% and 15%, indicating an expansion of 10-20 bps from fiscal 2020.

The company expects positive foreign-exchange impact of 2% on its results in U.S. dollars.

Operating-cash flow is anticipated in the range of $6.35-$6.85 billion. Free-cash flow is expected between $5.7 billion and $6.2 billion. Annual effective tax rate is now anticipated in the range of 23%-25%.

Currently, Accenture carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Upcoming Releases

Investors interested in the broader Zacks Business Services sector are keenly awaiting third-quarter 2020 earnings reports of key players like Waste Connections WCN, Waste Management WM and Republic Services RSG.  While Waste Connections will release earnings on Oct 28, Waste Management and Republic Services will report the same on Nov 2 and Nov 5, respectively.

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