What Accenture Calls "The New" Drives Solid Sales Growth

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Technology consulting and outsourcing giant Accenture (NYSE: ACN) reported third-quarter earnings on Thursday night. Here's what you need to know about the company's latest business update.

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Accenture's third-quarter results: The raw numbers

Metric

Q3 2017

Q3 2016

Year-Over-Year Change

Revenue

$9.4 billion

$9.0 billion

4.3%

Net income attributable to Accenture

$669 million

$897 million

(25%)

GAAP earnings per share (diluted)

$1.05

$1.41

(26%)

What happened with Accenture this quarter?

  • Four of Accenture's five reportable segments saw sales rising by low-single-digit percentages compared to the year-ago quarter. The outlier was the products division, where revenue rose by 13% to land at $2.4 billion.
  • Slicing the results up by geographic regions, both Europe and North America delivered 3% year-over-year revenue growth while the rest of the world saw a 16% sales jump.
  • These business trends are consistent with what Accenture saw in the first two quarters.
  • Bottom-line profits were hamstrung by a $510 million one-time charge as Accenture pulled the plug on its U.S. pension plan. Backing that line item and its tax effects out of Accenture's results leaves adjusted earnings of $1.02 billion or $1.52 per diluted share.
  • Free cash flows stopped at $1.7 billion in the first quarter, a 10.5% year-over-year increase.

What management had to say

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Accenture CEO Pierre Nanterme was particularly pleased with the growth in a group of operations termed "The New." That cohort, which includes businesses related to cloud computing, data security, and digital services, saw double-digit percentage growth and accounted for more than 50% of the quarter's total sales for the first time ever. A year ago, The New amounted to 40% of quarterly sales.

"I think we have an extremely clear strategy at Accenture, which is all about rotating to The New," Nanterme said on a conference call with analysts. "The New is driving growth in each of our five businesses in a very meaningful way, and we love that."

Looking ahead

Accenture's management provided the following guidance targets:

  • Fourth-quarter sales should land near $8.9 billion, reflecting approximately 7% year-over-year growth.
  • Accenture tightened its target for full-year GAAP earnings per share around the $5.40 midpoint. Non-GAAP earnings are now seen adding up to roughly $5.86 per share, at the top of the guidance range provided with the second-quarter report.

The company is latching on to higher-growth operations in a big way under the unified banner of The New. Keep a close eye on that effort as it becomes more and more synonymous with Accenture as a whole.

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Anders Bylund has no position in any stocks mentioned. The Motley Fool recommends Accenture. The Motley Fool has a disclosure policy.