Professional services company Accenture (ACN -0.32%) reported results for the first quarter of fiscal year 2017 early Wednesday morning. Shares were down 4% at noon Wednesday. Let's dig into what the company had to say.
Accenture's first-quarter results: The raw numbers
Metric |
Q1 2017 |
Q1 2016 |
Year-Over-Year Change |
---|---|---|---|
Net revenues |
$8.5 billion |
$8.0 billion |
6.4% |
Net income |
$1.1 billion |
$869 million |
22% |
GAAP EPS (diluted) |
$1.58 |
$1.28 |
23% |
What happened with Accenture this quarter?
Overcoming modest revenue gains and a 1% currency exchange headwind, Accenture expanded its profit margins across the board and returned $1.4 billion to shareholders.
- Gross margin for the first quarter was 32.1%, up from 32% in the year-ago period. Operating margins expanded from 15.2% to 15.6%, and net profit margins jumped from 10.8% to 12.4%. The strong bottom-line leap was helped by lower effective tax rates and a 1.1% lower share count.
- Free cash flows saw an 82% year-over-year boost, landing at $1.0 billion. The company still had to dip into cash reserves to fully fund its cash returns to shareholders, which included $588 million of share buybacks and $785 million in cash dividend payouts.
- Three of Accenture's five reportable segments grew sales by single-digit percentages year over year. Revenues related to resources dipped 4% lower while products led the way with a 17% gain. The products division also generated more operating income than any other segment.
- Sales growth was roughly equal between the consulting and outsourcing work types. Consulting accounted for approximately 54% of the company's total sales.
Management provided financial guidance for the second quarter and updated the view of the full fiscal year.
- Second-quarter sales should land near $8.3 billion, reflecting roughly 7% year-over-year growth in local currencies and a negative 2% impact from currency exchange effects.
- The full-year view now assumes a 2% currency headwind as well, compared to a flat currency trend in the guidance provided three months ago. The midpoint of the GAAP earnings range was lowered from $5.87 to $5.76 per diluted share.
- Other full-year 2017 targets were held steady. Operating margins are still seen at roughly 14.8%, operating cash flows stop near $4.75 billion, and free cash flows are headed toward $4.15 billion for the full year.
What management had to say
In a prepared statement, Accenture CEO and Chairman Pierre Nanterme said that he was pleased with the first-quarter results. He also painted a clear picture of the road ahead. "We continue to make significant investments in new and high-growth areas across Accenture -- especially digital, cloud and security services, which together now account for more than 40 percent of total revenues and again grew at a very strong double-digit rate in the quarter," he said.
Looking ahead
The high-growth services that Nanterme highlighted in his comments now account for roughly 40% of Accenture's overall sales, and are growing at a double-digit percentage pace. Most of these operations fall under Accenture's products segment, so the two concepts of products and high-growth operations go hand in hand.