Have Accenture Earnings Topped Out?

Accenture (NYSE: ACN  ) will release its quarterly report on Thursday, but investors still haven't recovered from the shock they suffered last quarter. Accenture earnings will have to post some strong results in order to erase the reaction that the company faced in late June, sending not only its own shares down but also pulling down rivals IBM and Cognizant Technology with it.

The fear that Accenture inspired throughout the industry has a lot to do with its reputation for excellence in information-technology consulting. The company has a long track record of success with IT and its other business lines, but Accenture is also vulnerable to macroeconomic trends that pull its entire industry down. Let's take an early look at what's been happening with Accenture over the past quarter and what we're likely to see in its report.

Stats on Accenture

Analyst EPS Estimate

$1.00

Change From Year-Ago EPS

13.6%

Revenue Estimate

$6.89 billion

Change From Year-Ago Revenue

0.8%

Earnings Beats in Past 4 Quarters

3

Source: Yahoo! Finance.

Where will Accenture earnings land this quarter?
Analysts have pulled down their views on Accenture earnings in recent months, reducing their August-quarter estimates by $0.08 and their full-year fiscal 2014 projections by roughly twice that amount. The stock hasn't been able to recover from those moves, falling 4% since mid-June.

Accenture's drop is largely due to its May-quarter earnings report, in which the company reported revenue that fell well short of expectations. In combination with reductions in its revenue-growth guidance of about 2 to 4 percentage points, investors concluded not just that Accenture would have trouble but that the entire IT consulting industry was in danger. That's why IBM and Cognizant fell on the same day, albeit far less than Accenture's double-digit percentage drop.

Still, Accenture has been smart about carving out important niches for its business. In India, Accenture has built up a workforce of about 70,000 employees, and although it lags behind the much larger domestic favorite Infosys, Accenture's base there gives it a good starting point from which to expand throughout Asia. Similarly, Accenture has seen substantial growth in its fledgling health and public services business, where Cognizant has looked to pick up about a quarter of its revenue.

Moreover, Accenture has a history of treating shareholders well, with big stock repurchases and rapid dividend growth. With ample free cash flow and no overhang of long-term debt, Accenture has financials to be proud of.

In the Accenture earnings report, watch to see how well the company does at recovering some of its lost revenue from its previous quarter's results. With some signs of increased IT spending in the industry, Accenture will want to pick up its share of added sales in order to cement its competitive position among its consultant peers.

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