Accenture’s Revenue Growth Gets a Boost in 2020

Accenture (NYSE:ACN) stock rose about 8% on Thursday following its results for the third quarter of fiscal 2020. Notably, the quarter ended on May 31. The consulting firm posted better-than-expected results in the third quarter. Accenture’s earnings and sales numbers beat Wall Street analysts’ consensus expectations. The company’s third-quarter results were boosted by its growing digital, cloud, and security-related services.

Accenture’s Q3 earnings results

In the third quarter, Accenture reported an adjusted EPS of $1.90 compared to $1.93 in the third quarter of fiscal 2019. The earnings beat analysts’ consensus estimate of $1.85 per share. Accenture generated sales of $10.99 billion—a reduction of 1.0% from the third quarter of fiscal 2019. The company beat analysts’ consensus revenue estimate of $10.87 billion. Accenture’s Consulting Services component accounted for 54.6% of its sales in the third quarter, while its Outsourcing Services component accounted for 45.4%. New bookings were $11.0 billion in the fiscal third quarter, consulting bookings were $6.2 billion, and outsourcing bookings were $4.8 billion.

In the third-quarter earnings release, Accenture CEO Julie Sweet said, “In times of crisis, our laser focus on creating value for our clients, our ability to deliver mission-critical services for the world’s leading companies, and our unwavering commitment to our people and to living our core values inside and outside Accenture make a difference. I am proud of how we helped ensure the business continuity of our clients, while prioritizing the health and well-being of our people, and continued to deliver on our commitments to our shareholders.” She also said, “We delivered third-quarter financial results that aligned with our expectations, including revenue growth in the top end of our guided range as well as strong profitability and free cash flow, while continuing to invest in our business and our people.”

Accenture’s financial outlook

For the fourth quarter of fiscal 2020, Accenture expects to generate sales between $10.6 billion and $11.0 billion. For fiscal 2020, the company expects its EPS to be $7.57–$7.70. The company also expects its fiscal 2020 revenue growth to be 3.5%–4.5%.

Wall Street analysts expect Accenture to report an adjusted EPS of $1.73 on revenue of $10.83 billion in the fourth quarter. Analysts also expect Accenture’s revenues to rise by 2.5% YoY (year-over-year) in fiscal 2020 to $44.3 billion. The sales could rise by 4.5% YoY in fiscal 2021 to $46.3 billion. The adjusted earnings will likely rise by 3.4% YoY in fiscal 2020 to $7.61 per share. However, the profits could rise by 5.8% YoY to $8.05 per share in fiscal 2021.

Analysts’ recommendations and target price

Among the 28 analysts tracking Accenture stock, 18 recommend a “buy,” nine recommend a “hold,” and one recommends a “sell.” Wall Street analysts’ mean target price on the stock is $217.79, which implies a 0.2% gain from the current level of $217.32. The consensus target price for the stock has risen from $189.63 in May—a growth of 14.8%.

Many analysts increased their target price for Accenture stock after its third-quarter earnings report.

  • Evercore ISI increased its target price from $179 to $230.
  • Wedbush increased its target price from $175 to $220.
  • RBC increased its target price from $207 to $233.
  • Piper Sandler increased its target price from $196 to $206.
  • Credit Suisse increased its target price to $194.
  • Cowen and Company increased its target price from $210 to $225.
  • J.P. Morgan increased its target price from $197 to $228.
  • Citigroup increased its target price from $230 to $247.
  • BMO increased its target price from $188 to $215.
  • Deutsche Bank increased its target price from $215 to $245.

Stock returns

Accenture stock rose 7.7% on Thursday and ended the day at $217.32 with a market cap of $143.8 billion. Notably, the stock is trading 0.3% below its 52-week high of $217.89 and 58.5% above its 52-week low of $137.15.

Based on the closing price on Thursday, Accenture stock was trading 6.1% above its 20-day moving average of $204.91. The stock is also trading 13.0% above its 50-day moving average of $192.25 and 16.6% above its 100-day moving average of $186.41. Accenture’s 14-day relative strength index number is 65. The number indicates that the stock is near overbought levels.

Accenture stock has a middle Bollinger Band level of $204.91, while its lower Bollinger Band level is $195.85. On Thursday, the stock closed near its upper Bollinger Band level of $213.98, which indicates that it’s overbought.

Currently, Accenture stock is trading at 28.54x its fiscal 2020 estimated EPS of $7.62. The stock is trading at 27.01x its fiscal 2021 estimated EPS of $8.05. Wall Street analysts expect Accenture’s earnings to grow at a CAGR of 7.36% over the next five years.

On Thursday, Cognizant (NASDAQ:CTSH) returned 3.3%. The S&P 500 and the Dow Jones Industrial Average rose 1.1% and 1.2%, respectively. Read Will US Stock Markets Crash? IMF and Rogers Weigh In to learn more.