Accenture shares target cut by Evercore ISI amid earnings miss

EditorEmilio Ghigini
Published 20/06/2024, 14:42
© Reuters.

On Thursday, Evercore ISI adjusted its outlook on Accenture plc (NYSE: NYSE:ACN) shares, reducing the price target from $390.00 to $375.00, while retaining an Outperform rating on the company's stock.

The adjustment follows Accenture's third-quarter earnings for fiscal year 2024, which fell slightly short of expectations. The company's adjusted earnings per share (EPS) of $3.13 missed Evercore ISI and the consensus estimates by $0.05 and $0.01, respectively.

Accenture's revenue for the quarter also came in 1 percentage point below both Evercore ISI and consensus estimates. This was attributed to the ongoing weak spending in discretionary IT services.

Despite these shortfalls, Accenture reported a significant 26% year-over-year increase in new bookings in local currency, with a robust book-to-bill ratio of 1.3 times. This was fueled by strong performance in Consulting and Managed Services, which recorded book-to-bill ratios of 1.1x and 1.5x, respectively.

The company's new bookings indicate a healthy pipeline of large transformational deals, which are expected to bolster revenue growth for fiscal year 2025 as these contracts start to generate revenue.

Accenture's outlook for the fourth quarter of fiscal year 2024 anticipates revenue to be between $16.05 billion and $16.65 billion, which is slightly below the midpoint of consensus forecasts of $16.55 billion.

For the full fiscal year 2024, Accenture has revised its revenue growth projections to a range of 1.5% to 2.5% in local currency, compared to the consensus forecast of 1.9%.

Additionally, the company has adjusted its EPS guidance to a range of $11.85 to $12.00, which is below the consensus forecast of $12.11. These revised figures reflect the challenges faced in the current fiscal year and set the stage for the company's performance expectations moving forward.

In other recent news, Accenture, a leading IT services provider, has projected its annual revenue growth to be between 1.5% and 2.5%, surpassing market expectations.

This comes amid increased adoption of artificial intelligence technologies and reflects Accenture's confidence in its business strategy. In a strategic collaboration, Accenture and defense technology firm L3Harris Technologies (NYSE:LHX) aim to advance L3Harris's digital overhaul, utilizing Accenture's expertise in digital technologies.

Recent analyst adjustments have seen Piper Sandler reduce its share price target for Accenture, citing a challenging demand environment and broader economic uncertainties, while Stifel also adjusted the company's price target, anticipating potential revenue headwinds.

Deutsche Bank, however, maintained a steady price target, expecting Accenture's full-year 2024 revenue growth forecast to be adjusted due to a weak IT spending environment.

In terms of earnings, Deutsche Bank anticipates that Accenture will announce third-quarter fiscal year 2024 revenues of approximately $16.56 billion and earnings per share of $3.17.

Recent developments within Accenture include significant leadership changes, with new appointments such as Angie Park as the new Chief Financial Officer and Mauro Macchi as the Chief Executive Officer for Europe, the Middle East, and Africa. The company has also been active in business developments, including the acquisition of Teamexpat, a specialist in embedded software for high-tech industries.

InvestingPro Insights

Accenture's recent performance and Evercore ISI's updated outlook on the company's shares can be further contextualized with InvestingPro insights. With a market capitalization of $197.67 billion, Accenture trades at a P/E ratio of 25.57, which is on the higher side when considering near-term earnings growth. The company's adjusted P/E ratio over the last twelve months as of Q2 2024 stands at 23.35, with a PEG ratio that suggests investors are paying a premium for growth at 16.02.

Notably, Accenture has shown resilience in its dividend policy, having raised its dividend for 4 consecutive years and maintaining payments for 20 consecutive years—a testament to its financial strength and commitment to shareholder returns. Additionally, the company is trading near its 52-week low, which could present a potential entry point for investors considering the robust book-to-bill ratios and the healthy pipeline of deals reported.

For readers looking to delve deeper into Accenture's financials and strategic positioning, InvestingPro offers additional insights, including 13 more InvestingPro Tips for ACN. Use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, and enhance your investment strategy with comprehensive data and expert analysis.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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