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On Tuesday, BMO Capital Markets maintained its Market Perform rating on Accenture plc (NYSE:ACN) with a steady price target of $355, as the stock trades at a relatively high P/E ratio of 25.1x relative to its near-term earnings growth. According to InvestingPro data, 10 analysts have recently revised their earnings estimates downward for the upcoming period. The firm’s analyst, Keith Bachman, provided insights into the relationship between the company’s recent signings and revenue projections. Bachman observed that over the past three years, the gap between the last twelve months (LTM) of total signings and the next twelve months (NTM) of total revenues has widened. This change is attributed primarily to the extended duration of Managed Services contracts.
In a detailed analysis covering the past 10 quarters, Bachman noted that Accenture’s Consulting segment exhibited less variance between NTM revenues and LTM signings compared to Outsourcing. The company has demonstrated solid financial performance, with revenue growing at 4.1% year-over-year to $67.2 billion and maintaining a healthy gross profit margin of 32.2%. Despite the disparities, he expressed confidence in the current estimates for the company, suggesting that they are reasonable. However, he also indicated that there appears to be limited potential for significant upside in Accenture’s stock at this point.
Bachman’s commentary reflects a cautious outlook on Accenture’s future stock performance, emphasizing the importance of contract durations in assessing the company’s revenue potential. The maintained Market Perform rating and price target signal BMO Capital Markets’ expectation that Accenture’s stock will perform in line with the broader market. InvestingPro analysis shows the stock has maintained dividend payments for 21 consecutive years, with a current yield of 1.93%, while the overall analyst consensus remains moderately bullish at 1.81 (on a scale where 1 is Strong Buy).
Accenture, a global professional services company, provides a range of services including consulting, digital, technology, and operations. The company’s stock performance is closely watched by investors as an indicator of the health of the consulting and outsourcing sectors.
As of the last trading session, Accenture’s stock price has been calibrated against BMO’s analysis and expectations, with the Market Perform rating suggesting that the company’s shares are currently valued appropriately given the available financial data and market conditions.
In other recent news, Accenture has reported its second-quarter financial results, showing a modest outperformance in both revenue and earnings per share (EPS) compared to consensus estimates. Despite this, the company’s operating income slightly missed expectations. Accenture has updated its guidance for fiscal year 2025, tightening revenue and EPS projections to the upside while narrowing operating margins to the downside. Piper Sandler, Baird, Mizuho (NYSE:MFG), and Deutsche Bank (ETR:DBKGn) have all adjusted their price targets for Accenture, citing various factors such as macroeconomic uncertainties and the company’s exposure to the US federal government. Piper Sandler lowered its price target to $364 while maintaining an Overweight rating, and Baird reduced its target to $372, keeping an Outperform rating. Mizuho cut its target to $365 but also maintained an Outperform rating, noting Accenture’s leadership in next-generation technology solutions like Generative AI. Deutsche Bank, however, reduced its price target more significantly to $290 and maintained a Hold rating, pointing to challenges such as the Federal Services segment and global economic uncertainties. Despite these adjustments, analysts have recognized Accenture’s strong market position and potential for growth, particularly in areas related to AI.
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