Analysis
of Accenture's Fourth Quarter Fiscal 2007 Results
Strong Finish to Great Year
Revenues,
Profits Both Up in Double Digits, Yet Stock Performance Lagging Behind
Stellar Business Results
But Stock Surging "the Morning After"
SCOTTSDALE, Sep 27 - Accenture did it
again. Its fourth quarter revenue and profit results blew the Wall
Street forecasts right out of the water.
The full fiscal year EPS was
up 24%, adjusted for one-time tax gain last year, while full year
revenues jumped 18% to $19.7 billion. (Accenture’s fiscal year ends Aug
31). Fourth quarter revenues rose 29% to $5.11 billion (up 23% in
constant currency), a new record for the period.
Free cash flow was
$2.27 billion, well above the company's previous outlook of $1.9 billion to
$2.1 billion. Accenture also increased its cash dividend by 20% to $0.42 per
share, and repurchased $2.3 billion of its stock during the fiscal year.
[snip]
Wall Street's Jaded View
In short,
Accenture excelled both on Main Street and on Wall Street in the last 12
months, capping a great year with a strong fourth quarter. And it has
been exceeding expectations now for almost three years. What more
could you ask of any company, right?
Indeed, every
time you listen to its quarterly calls, the company collects a ton of
compliments and congratulatory comments from
otherwise reserved financial
analysts (also see "Burning the Track," June
2007, for another example of it). And then they go back to the office
and...?
[snip]
Business Segment
Analysis: A "Cash Machine"
"All five operating groups recorded their highest-ever
annual revenues with double-digit growth in U.S. dollars,"
said Steve Rohleder, Accenture's COO (left).
"Four operating groups also turned in strong double-digit growth in
local currency." In other words, the company's growth engine
is firing on all cylinders.
Geographies.
The Asia/Pacific region had been the lead story for five quarters in a row.
But not this time. This time, revenues in Europe exploded by 48% to
$2.4 billion, widening their lead over the Americas region which also grew
in double digits (up 11%).
[snip]
Industries.
Whenever you have the "weakest" line of business growing at 19%, you know
you must have had a great quarter. In Accenture's case, the two
"weakest" industry segments were High Tech & Communications and Financial
Services, each of which was
up by an impressive 19% over the same quarter a year ago.
[snip]
Horizontal
Platforms.
There has been a strong demand for Consulting
throughout the year and across all five lines of business,
Rohleder said. Consulting now accounts for $11.9
billion or 60% of the company's $19.7 billion revenue.
And it's also growing faster than outsourcing.
[snip]
New Bookings.
Accenture's fourth quarter bookings of $4.9 billion were
about even with those a year ago, but they added to the FY07
total of $22 billion, a new annual record.
About 63% of that total came from consulting, with the
remainder being outsourcing engagements. For the full
year, consulting represented 58% of the total, while
outsourcing accounted for 42% (see the chart).
[snip]
Globalization of
Resources Continues
Accenture is continuing to invest in the
expansion of its global delivery network, ending the year
with more than 71,000 people, a 48% increase over FY06.
The greatest expansion is continuing to take place in
Asia/Pacific, where headcount grew by 65% in the last year.
It was also up over 30% in both the Americas and Europe.
India and the Philippines are the biggest magnets for global
delivery applications.\
[snip]
Summary & Outlook:
Main Street vs. Wall Street
"We have a powerful momentum going and enter the (fiscal) year (2008) with a
great deal of confidence to maintain our leadership position," said Green.
"Our annual
results reflect strong expansion across all three dimensions of our
business. We also drove profitability through effective cost management and
overall operational discipline. Finally, we gained market share globally and
grew well above our proxy peer group."
[snip]
So overall, "we entered the year with a great deal of
confidence in our ability to keep building on our leadership position in the
industry," he summed it up.
It remains to be seen if the so far skeptical markets accept
Accenture's optimism. At least in this company's case, they won't have
to take its executives' words alone. All they need to do is look at
the results.
[snip]
"That's
all she wrote," we're afraid, for those of you who are NOT Annex
Research clients, who are now reading the complete Annex Bulletin, along
with many tables and charts that back up our forecast.
Qualified media and friends of Annex may
request a TEMPORARY User ID and Password by clicking
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To find our how you can become one of our
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Happy bargain
hunting!
Bob
Djurdjevic
Market Update: Stock Moves Up Sharply the Morning After
 SCOTTSDALE,
Sep 28 - It was almost as if the market read our above report overnight
before it was actually published. The Accenture stock moved up sharply
"the morning after," rising five points to $40 in early morning trading.
"We know
the markets can be nonsensical for a long time," we wrote last night. "But
eventually, they tend to right themselves, like a sailboat when the wind
changes direction..." we wrote last night. "Could this be a start of a trend
reversal?"
Guess investors are finally waking up to the value Accenture
brings to the table for its customers and shareholders alike.
Interestingly, this spurt happened at a time this morning when the whole
market was slightly down. Accenture's surge is also helping pull up
the shares of its competitors, including that of the laggard EDS, whose
stock has been in the doldrums in the last two months since the change in
its leadership was announced.
Institutional Owners
Flee in Third Quarter
SCOTTSDALE, Nov 25 - Nearly two months after Accenture
reported its fourth quarter and full year 2007 business results, and the
investors basically shrugged off the strong finish, it is becoming clearer
WHY that is happening. Looks like the major institutional shareholders
are starting to abandon ship. Eleven of top 15 reduced their holdings
in the third quarter. Seven of them disappeared altogether from the
Top 15 since a year ago.
[3 CHARTS HERE]
Meanwhile, the percentage of institutional shareholdings as
of Sep 30, the latest date for owner data, has gone up to 82% (from about
50% a year ago). And so has their impact on the price of the stock,
especially considering some of the big price swings in the third quarter
(see above charts).
[snip]
For additional Annex Research reports, check out... Annex
Bulletin Index 2007 (including all prior years' indexes)
Or just click on SEARCH and use "company or topic name" keywords.
Volume XXIII, Annex
Bulletin 2007-33
September 27, 2007
Bob Djurdjevic, Editor
(c) Copyright 2007 by Annex Research, Inc. All rights reserved.
e-mail: annex@djurdjevic.com
8183 E Mountain Spring Rd, Scottsdale, Arizona 85255
Tel/Fax: +1-602-824-8111
The copyright-protected information contained in the ANNEX BULLETINS is part of the Comprehensive Market Service (CMS).
It is intended for the exclusive use
by those who have contracted for the entire CMS service. |
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|
