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Shares of Accenture, the tech outsourcing and consulting company, jumped to a record high Thursday after the company reported a 24% improvement in fiscal second-quarter earnings, well beyond what Wall Street expected. It also beat revenue estimates. The company also raised its earnings guidance for the fiscal year ending in August. The improvements are driven by the digital transformation of Accenture’s customers and their fear of disruption, according to the CEO. Accenture ( ACN ) stock was up 5.5% in afternoon trading in the stock market today , above 113 and up more than 20% from a seven-month low of 93.35 hit on Feb. 9, in the depths of the infamous Software Sag of 2016. Rivals IBM ( IBM ) and Cognizant Technology Solutions ( CTSH ) were each up more than 1.7% Thursday afternoon, and India tech outsourcer Infosys ( INFY ) was up nearly 1%. Dublin-based Accenture said adjusted EPS reached $1.34 after removing income taxes and the gain on the sale of Navitaire, vs. $1.08 a year ago, on revenue up 6% to $7.9 billion. Analysts polled by Thomson Reuters expected EPS of $1.18 minus items for the quarter ended Feb. 29 on revenue of $7.72 billion. “We are benefiting from the focused investments we are making to rotate our business to new, high-growth areas where our capabilities are clearly resonating with the needs of our clients and differentiating us in the marketplace,” said Accenture CEO Pierre Nanterme in the earnings release. “At the same time, we continue to manage Accenture with discipline to further enhance our competitiveness. We remain very well-positioned to continue driving profitable growth and delivering value for our clients and shareholders.” Accenture CEO: Economic Environment Sluggish In the company’s earnings conference call with analysts, Nanterme, echoing his remarks in October, said, “The overall economic environment is sluggish, to say the least … unstable, risky, extraordinarily complex.” He said he is “not noticing” much change in the sources of revenue from his customers, but “it’s all about digitalization. … All the leaders in all the industries are subject to disruption. That’s the new factor in town. It’s about not being disrupted … . I see this cycle is here for quite a while. They have to invest (into) rationalization of the operations, IT efficiency … across the board … (which) is driving our business.” The company guided the current Q3 revenue to $8.1 billion to $8.35 billion, up 7% to 10% in local currency after assuming a 2.5% foreign exchange impact, compared with $8.275 billion a year ago. The midpoint is slightly above analyst views. The company didn’t project Q3 earnings, but analysts expect EPS ex items of $1.42, up 9%. Accenture raised its fiscal year earnings guidance to $5.21 to $5.32 per share excluding the after-tax impact of the gain on the sale of Navitaire vs. its earlier guidance of $5.09 to $5.24. Analysts were modeling $5.22, up 8.3% from $4.82 in fiscal 2015. At the new $5.265 midpoint, the fresh guidance represents a 9.2% gain for adjusted EPS. Accenture said sales for its communications, media and technology unit rose 6% to $1.61 billion; financial services also rose 6%, to $1.59 billion; health and public services rose 12% to $1.48 billion; and products rose 8% to $1.85 billion. But resources, which include the struggling energy industry, fell 3% to $1.21 billion. North America sales rose 11% to $3.41 billion, while Europe rose 5% growth to $2.78 billion and growth markets slowed 4% to $1.37 billion. The company declared a semiannual cash dividend of $1.10 per share. In Q2 it repurchased or redeemed 8.1 million shares for $829 million, bringing the total spent on repurchases to $1.49 billion for the year. With an IBD Composite Rating of 82, Accenture is one of the better performers in IBD’s Computer-Tech Services industry group, among the top 18% of all stocks on a variety of metrics, including earnings and sales growth and stock performance. The biggest company in the group, IBM, rates a 55 CR. Infosys has an 87 CR and Cognizant an 84. Image provided by Shutterstock . Scalper1 News
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