Accenture Plc. (ACN, Financial) recently revealed its second quarter results for fiscal 2015. The company reported net revenue of $7.49 billion, up 5.1% year-over-year, comfortably beating the consensus estimate of $7.35 billion. EPS for the quarter also grew 4.8% to $1.08 a share from the prior-year quarter’s $1.03 a share, due to higher revenues and non-operating income as well as lower share count. The company also revealed a tepid outlook for the third quarter, although it increased guidance for full fiscal 2015 on the back of its current performance. Following the results, Accenture shares climbed to a new 52-week high of $94.98 before closing at $94.17.
Growth across Segments Boosts Revenues
While Accenture’s net revenue of $7.49 billion for the second quarter of fiscal 2015 beat the consensus estimate, the figure also came in closer to higher end of the company’s guided range of $7.25-$7.50 billion. The company also saw a 4.6% year-over-year decline in operating costs to $1.22 million, due to lower SG&A expenditure. However, gross margins for the quarter dipped 29.9% or 140 basis points, mainly owing to higher service costs. Consequently, Accenture’s net income for the second quarter stood at $731.8 million or $1.08 a share.
Sector wise, the company logged a 6% year-over-year growth to $3.65 billion at its Outsourcing sector, while its Consulting sector reported a 4% year-over-year growth to $3.84 billion. Accenture also reported $5.1 billion worth new Outsourcing bookings and $4.2 billion worth new Consulting bookings for the quarter, taking the overall bookings to $9.4 billion. The company said that new bookings were hurt by negative foreign currency headwinds during the quarter.
Amongst operating segments, revenues at Accenture’s Communications, Media & Technology segment stood at $1.52 billion, up 8% year-over-year, while Health & Public Services revenues grew 12% to $1.32 billion. Concurrently, the Products and Financial Services segments generated revenues of $1.85 billion and $1.59 billion, up 6% and 2% respectively compared to the prior-year figures. However, Accenture saw a 1% year-over-year dip in revenues from its Resources segment, logging in a total of $1.21 billion for the quarter.
The company witnessed 13% revenue growth in the North American markets and 3% growth the combined Growth Markets of Asia-Pacific, Russia, the Middle East, Latin America, Turkey and Africa. However, revenues were down 2% year-over-year from the Europe.
Guidance for Q3 2015
Accenture, which competes with businesses such as IBM Corp. (IBM, Financial), Cognizant Technology Solutions (CTSH, Financial) and the privately held Deloitte Consulting LLC in the Information Technology services market, also revealed its guidance for the third quarter of fiscal 2015. The company projected net revenue for the quarter in the $7.35-$7.60 billion range, lower than the consensus estimate of $7.62 billion. However, Accenture also revised its guidance for fiscal 2015 from the previous projection of 5%-8% revenue growth to the new expectation of 8%-10% growth in revenues during the year. Concurrently, the company foresees a slight drop in its EPS for the fiscal from the previous range of $4.66-$4.80to to the new $4.66-$4.76 a share range. Consensus estimates had pegged EPS for the third quarter to be $4.75 a share. New bookings for the full fiscal 2015 are now expected to be in the $33-$35 billion range.
Final Thoughts
Accenture reported better-than-expected results for the second quarter of fiscal 2015, with both revenues and earnings registering growth on a year-over-year basis. As the company increases focus on new bookings and its Outsourcing business Accenture also reiterated its commitment to reward shareholders, repurchasing 6.8 million shares worth a total of $601 million and announcing a semi-annual dividend payout of $1.02 a share. Although investors were downbeat following the tepid Q3 2015 guidance, the disappointment was short-lived at the markets. However, the company is likely to face competition and foreign currency headwinds along with a sluggish global spending environment going ahead. Experts are looking at a 9.6% average annual earnings growth rate for Accenture over the next five years with a peak in 2017. The company’s stock currently carries a ‘hold’ guidance.
