Accenture Earnings: It's All About "The New"

Global consulting and outsourcing company Accenture (NYSE: ACN) reported first-quarter results for the 2019 fiscal year on Thursday. The company's focus on high-growth market sectors under its "The New" banner continued unabated, powering 7% sales growth and 13% higher net profits.

Accenture's third-quarter results: The raw numbers

What happened with Accenture this quarter?

  • Accenture's chosen focus businesses -- cloud, security, and digital services -- accounted for more than 60% of total revenues in this quarter. That's up from 55% a year ago, and sales in this category showed "strong double-digit growth" again.
  • European revenues increased 6% year over year, lagging behind both North America's 10% growth, and Accenture's growth markets surging 17% higher. Among the so-called growth markets, Japan led the way with "very strong double-digit" revenue increases. Other double-digit-percentage growers included Singapore, China, and Brazil.
  • In business segment terms, the main driver behind Accenture's double-digit sales surges came from strong interest in communications, media and technology services. As an example of this trend, management highlighted a large contract with Sprint (NYSE: S) that aimed to create new customer experiences and optimize the American telecom's operations. Accenture's input has boosted Sprint's customer satisfaction and online phone sales, saving the company "millions of dollars" through tighter operations.

What management had to say

On the earnings call, one analyst wanted to know more about Accenture's plans for shaking up the "traditional advertising" industry. CEO Pierre Nanterme didn't like the T-word at all:

So Accenture is steering its clients away from old-school business recipes wherever possible, and deeper into next-generation solutions. In the advertising space, this means a heavy focus on digital ad platforms and dynamic ad campaigns. Deep data analysis plays a major part here, right alongside artificial intelligence:

Looking ahead

For the second quarter of 2019, Accenture expects revenues in the neighborhood of $10.3 billion after accounting for a 4% currency-exchange-based headwind. In local currencies, year-over-year growth should land near 8%.

Management also noted that constant-currency revenue growth should stay at roughly 8% throughout the new fiscal year. Free cash flow for the full year is targeted at approximately $5.3 billion, down from $5.4 billion in 2018, and a current annual run rate of roughly $5.5 billion.

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