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

By Anders Bylund - Dec 21, 2018 at 7:53PM

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The outsourcing giant's guiding mantra is all about digital tools and cloud computing, and customers around the world are embracing that vision.

Global consulting and outsourcing company Accenture (ACN -5.81%) 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

Metric

Q1 2019

Q1 2018

Year-Over-Year Change

Revenue

$10.6 billion

$9.9 billion

7.3%

Net income

$1.27 billion

$1.12 billion

13%

GAAP earnings per share (diluted)

$1.96

$1.79

9.5%

Data source: Accenture. GAAP = generally accepted accounting principles.

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 (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.
A group of tech workers conferring in a room full of computer screens and blinking LED lights

Consultants consulting, as they do. Image source: Getty Images.

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:

I said before that probably the word we like the most with [CFO David Rowland] is "broad-based." The word we hate the most is "traditional." We have no appetite to build anything traditional, anything legacy, anything that has been done by the industry for 50 years. All the hypotheses -- being serious again, if you will (I was serious) -- but to be even more serious on this, our point is to be part of the disruption of this industry, and we want to be a disruptor.

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:

We will always look at things that are going to be either more creative or more new, if you will. But the point is if it's too traditional, it's going to commoditize, and if it's commoditizing, this is not the market we want to be in.

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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