Bullish indicating open at $55-$60, IPO prices at $37
On Thursday, Stifel analysts adjusted their outlook for Accenture plc (NYSE:ACN), reducing the price target to $355 from the previous $380, while still affirming a Buy rating for the company’s shares. With a current market capitalization of $188.32 billion and a P/E ratio of 25, Accenture remains a significant player in the IT Services sector. The revision follows Accenture’s second-quarter results, which showcased a modest revenue increase of 4.5% year-over-year on an organic constant currency basis, with earnings per share aligning with expectations. According to InvestingPro, eight analysts have recently revised their earnings estimates downward for the upcoming period.
For fiscal year 2025, which ends in August, Accenture has raised the lower end of its revenue guidance by 100 basis points to a range of 2-4% growth on an organic constant currency basis. However, the company has slightly decreased its upper-end margin guidance by 10 basis points, now expecting a margin improvement of 10-20 basis points. This adjustment comes as the second half of the fiscal year is projected to see organic growth of approximately 2%, compared to 4% in the first half and against a consensus estimate of 2.5%. The company has demonstrated strong financial stability, maintaining dividend payments for 21 consecutive years with a current yield of 1.82%.
Management at Accenture highlighted an increase in uncertainty in recent weeks that could potentially affect demand, but noted that no tangible impact has been observed thus far. The company’s exposure to the US Federal sector represents 16% of its revenue in the Americas, equating to 8% of its overall revenue. The guidance provided by Accenture assumes that the current environment will remain stable, with the higher end of the guidance remaining unchanged, while the lower end accounts for potential degradation.
Accenture’s stock has experienced a significant re-rating over the past month, with a 7% decline on Thursday alone. The shares are currently trading at a 35% premium to the equal-weight S&P 500, which is a reduction from their average premium of 60%. Despite the near-term uncertainty and market volatility, Stifel analysts consider the current share price an attractive entry point for investors looking to invest in a company they regard as a best-in-class mid-to-high single-digit compounder.
In other recent news, Accenture reported its financial results for the second quarter of fiscal year 2025, surpassing analyst expectations with an earnings per share of $2.82, slightly above the forecast of $2.81. Revenue for the quarter reached $16.7 billion, exceeding the anticipated $16.63 billion. Despite the positive results, Accenture’s stock experienced a decline in premarket trading, reflecting investor concerns over broader market conditions. The company’s new bookings remained flat at $20.9 billion, signaling a cautious market environment. Accenture’s strategic focus on artificial intelligence and digital transformation continues to yield results, with $1.4 billion in new GenAI bookings. Additionally, Accenture projects full-year revenue growth of 5-7% in local currency, indicating a stable outlook. In related industry news, IBM (NYSE:IBM) and Cognizant Technology Solutions (NASDAQ:CTSH) saw their stock prices dip following Accenture’s announcement of challenges with federal contracts, highlighting investor concerns about potential impacts of government spending cuts on the consulting industry. Mizuho (NYSE:MFG) analyst Sean Kennedy noted that despite the challenges, Accenture’s strong quarterly performance and narrowing revenue guidance should provide some assurance to investors.
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