Case Study: Accenture (ACN) stock according to high performing analysts
Key Points
Performance
Accenture shares rose by 7.43% this week, pushing their year-to-date gains up into positive territory. Now ACN’s year-to-date returns are 0.64%. This compares poorly to the S&P 500 which is up by 3.84% during 2023 thus far.
Event & Impact
Accenture posted fiscal 2023 second quarter earnings results this week, beating Wall Street estimates on both the top and bottom lines. During Q2, ACN’s revenue totaled $15.81 billion, beating Wall Street’s consensus estimate by $220 million. Accenture’s Q2 non-GAAP earnings-per-share came in at $2.69, beating Wall Street’s consensus estimate by $0.19/share.
Noteworthy News:
Accenture beat Wall Street's estimates during Q2, but lowered its full-year sales growth guidance. However, the company announced that it was cutting 19,000 jobs, representing approximately 2.5% of its workforce, which has the potential to bolster profits. Also, ACN announced its newest acquisition this week; a small artificial intelligence firm which expands the company’s growth pipeline.
Nobias Insights
61% of recent articles published by credible authors focused on Accenture shares offer a “bullish” bias. One of the two credible Wall Street analysts covering ACN believes shares are likely to rise in value. The average price target applied to ACN by these credible analysts is $287.00, which implies upside potential of approximately 5.5% relative to the stock’s current share price of $272.00.
Bullish Take Shivandi Shinde, a Nobias 4-star rated author, said, “Flutura [ACN’s Q2 acquisition] will strengthen Accenture’s industrial AI services to increase the performance of industrial plants, refineries, and supply chains while also enabling clients to accomplish their net zero goals faster.”
Bearish Take Reinhardt Krause, a Nobias 5-star rated author, said, “Accenture lowered its fiscal 2023 revenue growth outlook to a range of 8% to 10% in local currency, compared with 8% to 11% previously.”
ACN Mar 2023
Historically, Accenture (ACN) has been a market beating stock that often flies under the radar in terms of investor name recognition. ACN shares have posted 5 and 10-year price gains of 82.72% and 258.04%, respectively. Both of these figures compare favorably to the S&P 500 which has posted gains of 51.99% and 151.64% over those same two periods of time. What’s more, Accenture has a generous dividend growth policy which adds to its total return potential. ACN shares currently yield 1.65% and have a 5-year dividend growth rate of 10.48%.
This double digit dividend growth is supported by reliable fundamental growth; over the last 20 years, Accenture has posted negative year-over-year earnings per share growth just 2 times (both of which were -1% results, in 2003 and 2010). And yet, with all of this being said, ACN shares have underperformed recently.
During the trailing 12-month period, ACN is down by 16.38%, which is worse than the S&P 500’s -12.15% performance. Furthermore, on a year-to-date basis, Accenture shares are only up by 0.64%, which is worse than the S&P 500’s 3.84% gains. But, after a strong earnings report this week ACN shares rallied by 7.43% and according to the credible authors and analysts that the Nobias algorithm tracks, this positive trajectory could be here to stay.
Bearish Nobias Credible Analysts Opinions:
After Accenture’s last quarter, Surinder Thind, a Nobias 4-star rated analyst, lowered his price target on ACN shares due to question marks regarding the macro environment that Accenture was operating in. According to The Fly on the Wall, “Jefferies analyst Surinder Thind lowered the firm's price target on Accenture to $279 from $290 and keeps a Hold rating on the shares, telling investors that he is "slightly more cautious" following the company's fiscal Q1 earnings report. The reiteration of FY23 constant currency revenue growth is "an important positive," as it suggests there has not been a meaningful shift in overall client demand since last quarter, said Thind, who adds that the guidance "should be viewed with some caution" with clients yet to finalize 2023 budgets.” When reporting its Q2 results, Accenture appears to have allayed those fears, posting results that beat Wall Street’s estimates on both the top and bottom lines.
Reinhardt Krause, a Nobias 5-star rated author, broke down ACN’s Q2 results in an article that he published at Investors.com this week, writing, “Accenture earnings for the quarter ended Feb. 28 rose 6% to $2.69 per share on an adjusted basis, said the Dublin-based global tech services and consulting firm.” Krause continued, “Including acquisitions, revenue climbed 5% to $15.8 billion, Accenture said.” Looking at Wall Street’s expectations coming into the quarterly results, Kruase wrote, “Analysts expected Accenture earnings of $2.49 a share on sales of $15.59 billion.”
Looking at the forward guidance that the company provided, Krause wrote, “For its fiscal third quarter, which ends in May, Accenture said it expects revenue of $16.4 billion at the mid-point of guidance. Analysts had projected revenue of $16.6 billion.” “As expected,” he noted, “Accenture lowered its fiscal 2023 revenue growth outlook to a range of 8% to 10% in local currency, compared with 8% to 11% previously.”
Although management lowered sales expectations, they also took steps to lower capital expenditures with hopes to bolster profits, namely in the form of layoffs. Amit Mudgill, a Nobias 4-star rated author, put a spotlight on this decision in an article that he published at MSN.com, stating, “In numbers, 19,000 employees accounted for 2.5 per cent of Accenture's workforce, equally split between billable and corporate resources.”
“The Accenture management indicated that this is part of a proactive rationalisation [sic] exercise to correct the structurally higher cost base due to compounding wage inflation witnessed over the past two years,” Mudgill continued. Lastly, he stated, “Importantly, it said that this does not reflect demand weakness.”
Although Accenture is reducing its workforce, the company continues to invest in high growth areas via mergers and acquisitions.
Bullish Nobias Credible Analysts Opinions:
This week the company announced its latest acquisition and Shivandi Shinde, a Nobias 4-star rated author, covered the news. In an article published at The Business Standard, Shinde wrote, “NYSE-listed IT firm Accenture on Tuesday announced acquiring industrial artificial intelligence (AI) company Flutura, which is headquartered in Bengaluru. The deal’s financial details were not disclosed.”
“This will be Accenture’s third acquisition in the data and AI space in India as it builds data and AI capabilities. It acquired India-headquartered Bridgei2i and Byte Prophecy in 2021 and 2020,” she wrote.
Nicholas Ward is a Senior Investment Analyst at Wide Moat Research. He has spent the last 8 years writing about the stock market at various publications, including Seeking Alpha, The Street, Forbes Real Estate Investor, Sure Dividend, The Dividend Kings, iREIT, Safe High Yield, and The Intelligent Dividend Investor.
Although there are still macroeconomic uncertainties surrounding broader IT spending with interest rates still on the rise, it appears that the company’s growth guidance has renewed the market’s confidence in ACN shares.
Shinde continued, “Flutura will strengthen Accenture’s industrial AI services to increase the performance of industrial plants, refineries, and supply chains while also enabling clients to accomplish their net zero goals faster.” She added, “Accenture plans to bring Flutura’s capabilities to clients in the energy, chemicals, metals, mining, and pharmaceutical industries, said the company.”
Overall bias of Nobias Credible Analysts and Bloggers:
Even after this week’s rally from the $253 level to $272, the credible Wall Street analysts that the Nobias algorithm tracks signal further upside ahead. Currently, the average price target being applied to ACN shares by these credible individuals is $287, which represents upside potential of 5.5%. Furthermore, 61% of recent articles published by credible authors have expressed a “bullish” bias towards shares.
Disclosure: Nicholas Ward is long ACN. Nicholas Ward wrote this article for Nobias at their request with the intention of giving investors a balanced perspective based on the writings of Nobias highly rated analysts and bloggers. Nobias has no business relationship with any company whose stock is mentioned in this article and does not have a position in this stock.
Additional disclosure: All content is published and provided as an information source for investors capable of making their own investment decisions. None of the information offered should be construed to be advice or a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. The information offered is impersonal and not tailored to the investment needs of any specific person.
Disclaimer: The Nobias star rating is based on past performance results and is not an indicator of future results. These past performance returns do not represent returns that any investor actually earned. Assumptions made include the ability to purchase the stocks recommended by the author under liquid markets where the transaction would be at the market price for the day. In reality, loss in liquidity may have a material impact on the returns that actually may have been earned. Further, returns are calculated without any including transaction costs, management fees, performance fees or expenses, or reinvestment of dividends and other income. This information is provided for illustrative purposes only.