Bloomberg News

Accenture Forecasts Profit That May Fall Short of Estimates (2)

September 27, 2013

Accenture Plc (ACN:US), the world’s second-largest technology-consulting company, forecast earnings that may fall short of analysts’ estimates amid increasing competition from Indian providers.

Profit for fiscal 2014, which began this month, will be $4.42 to $4.54 a share, the company said yesterday in a statement. That compared with a $4.51 average estimate of analysts surveyed by Bloomberg. Fourth-quarter earnings were $1.01 a share, matching the average forecast, while revenue rose to $7.09 billion, beating the $6.9 billion average estimate.

The company is facing a mounting challenge from emerging providers of information-technology services, mostly out of India, such as Tata Consultancy Services Ltd. (TCS), Cognizant Technology Solutions Corp. (CTSH:US) and Infosys Ltd. (INFO) Bookings were $8.4 billion, down from $9.2 billion a year earlier, with 46 percent coming from the more profitable consulting business.

“The bookings number is disappointing,” said Arvind Ramnani, an analyst with BNP Paribas who has a hold rating on the shares. “Consulting is a little bit lighter than I expected.”

Accenture fell 2.3 percent to $74.09 at the close in New York. The shares have gained 11 percent this year.

More Competition

Slow growth in the global economy is causing some businesses to pare back their spending, said Keith Bachman, an analyst at BMO Capital Markets in New York.

“Accenture’s growth is slowing even as the performance of large Indian IT vendors has improved,” Bachman said in a note to investors before earnings were released. “As these companies have become larger, they are now in a position to deliver consulting projects in certain areas such as analytics, mobility and cloud.”

The company also raised its semiannual dividend 15 percent to 93 cents a share.

Fourth-quarter net income rose to $671 million, or $1.01 a share, from $578 million, or 88 cents, a year earlier, the company said.

The company is considered a bellwether for the information-technology market because its earnings cycle ends one month sooner than competitors. International Business Machines Corp. (IBM:US), the largest technology-services provider, is scheduled to announce earnings Oct. 16.

While IBM has also seen revenue slow in its consulting division, it has a better plan for buybacks and dividends that return money to shareholders, said Steven Milunovich, an analyst at UBS AG in New York.

“We would argue -- and activists may take notice -- that with no debt Accenture could be doing more,” Milunovich said in a note to investors this week. “If recent soft results continue, shareholders might get antsy.”

To contact the reporter on this story: Sarah Frier in New York at sfrier1@bloomberg.net

To contact the editor responsible for this story: Nick Turner at nturner7@bloomberg.net


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Companies Mentioned

  • ACN
    (Accenture PLC)
    • $91.32 USD
    • -0.10
    • -0.11%
  • CTSH
    (Cognizant Technology Solutions Corp)
    • $54.26 USD
    • 0.04
    • 0.07%
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