Accenture Survives Software Sag Of ’16; Stock Flirts With Record
Seemingly fully recovered from the infamous Software Sag of 2016 in January and February, big-cap Accenture ( ACN ) is flirting with a record-high stock price amid growth in its services, as it heads towards its fiscal Q2 earnings release due before the market open Thursday. Accenture stock was down a fraction in early trading in the stock market today , near 108, 18% above its seven-month low of 91.40 touched on Feb. 9 and just 2% off an all-time high of 109.86 set Oct. 28. Analysts polled by Thomson Reuters on average estimated Accenture earned $1.18 per share minus items for the quarter ended in February, up 9% from the year-earlier period, on revenue of $7.72 billion, down 2.6%. Accenture guided Q2 to $7.62 billion at the midpoint of its range. Dublin-based Accenture “cited no weakness in its financial services pipeline” during its Q1 earnings release on Dec. 17, wrote Cowen analyst Bryan Bergin in a recent research note. “This was (about) three weeks before a tumultuous start to 2016, and nearly two months prior to (services rival Cognizant Technology Solutions ( CTSH )) sounding warning bells in its banking and financial services vertical.” In the Cowen Feb. 25 research note, entitled “The Sky Does Not Appear to be Falling in Financial Services IT Spending,” Bergin wrote that “vendors that have noted service interruption have generally tied such weakness to a handful of specific clients. There have been Indian vendors with reports of healthy internal fiscal 2017 revenue growth targets, (notably Infosys ( INFY ) and Wipro ( WIT )) and positive industry demand narratives across investor days by ( Genpact ( G ), Epam Systems ( EPAM ) and Tata Consultancy Services) that have not yielded indications of across-the-board financials’ spending declines.” He noted that Accenture has grown revenue in financial services in constant currency in four of the last five quarters, although financial clients represent only 21% of Accenture revenue in the last 12 months. In a research note last week, Trefis applauded Accenture for a “very resilient business model,” with 45% of its business in outsourcing and 55% in consulting. Cowen rates Accenture stock at outperform, with a 115 price target. With a healthy IBD Composite Rating (CR) of 80, meaning its stock is outperforming 80% of S&P 500 issues in a variety of metrics, Accenture is worth about half of IBM ‘s ( IBM ) $142.8 billion in terms of market cap. IBM has a weak 56 CR. Infosys, with an 86 CR, has a $42.5 billion market cap, while Cognizant, with an 83 CR, is worth about $36.2 billion based on its stock price. Newly freed from PCs and printers, Hewlett Packard Enterprise ( HPE ) earns a 65 CR, with a $30.4 billion market cap. Slightly smaller Wipro carries a 68 CR, with $30.3 billion in market value. Those six companies comprise the largest members of IBD’s Computer-Tech Services industry group.