Accenture Gives Full-Year Guidance a Modest Boost

Business consulting and IT outsourcing giant Accenture (ACN -0.32%) reported earnings this Wednesday morning. The report, which covered the first quarter of Accenture's fiscal year 2020, exceeded Wall Street's expectations across the board and was matched by a slight boost to management's full-year guidance targets.

Accenture's first-quarter results by the numbers

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

Management's guidance for this quarter called for revenue near $11.1 billion.

All five of Accenture's reportable operating segments turned in solid year-over-year revenue growth. The strongest gains came from health and public service at a 12% sales gain and the products division, which posted 10% higher sales. The remaining departments reported revenue growth between 3% and 5%.

Breaking the quarter down by geographic regions instead, Accenture's softest performance came from Europe at a 2% year-over-year sales increase. North America held the middle ground with a 9% gain, and growth markets lived up to their name with a 12% revenue boost.

First-quarter order bookings stopped at 10.3%, slightly above the year-ago period's $10.2 billion.

Looking ahead, Accenture's management guided second-quarter revenue to approximately $11 billion, reflecting roughly 7% growth compared to the second quarter of fiscal year 2019. Management also tightened their full-year guidance targets around the upper half of each existing guidance range. The revenue growth target increased from 7.5% to 8%. That works out to lifting the second-quarter sales target from $11.2 billion to $11.3 billion.

On the bottom line, the midpoint of the updated guidance points to earnings near $7.75 per share, up from $7.73 per share three months ago.

Image source: Getty Images.

What's new with The New?

On the earnings call, CEO Julie Sweet noted that the slice of operations that her company calls "The New" once again accounted for the majority of this quarter's total sales and arguably serves as the operating core of Accenture's entire business model.

"The New -- digital, cloud, and security -- is now our core, accounting for about 65% of total revenues and we are focused on continuous innovation across these services," Sweet said.

"Results continue to be driven by strong double-digit growth in digital, cloud, and security-related services," added CFO KC McClure.

That revenue trend also applies to new orders, where The New "dominated" incoming contracts in the first quarter.

Should you buy Accenture today?

Accenture's shares rose approximately 1% on Wednesday. The stock has now gained 38% over the last 52 weeks and trades at valuation multiples usually reserved for fairly high-octane growth stocks, including a trailing P/E ratio of 28.3 and a price-to-book ratio in the neighborhood of 9.

Wall Street analysts largely agree that Accenture has earned this valuation, but also that the stock is fully valued at its current price level. Though I concur with all of the above, I would also like to add that the company has reshaped its business model to fit the contours of a rapidly changing market and should be expected to keep growing faster than the broader consulting sector. This is a high-quality industry leader with an agile operating structure and a high-level willingness to make drastic changes in order to keep up with a dynamic market environment.

Accenture may not be a screaming buy today, but it's a solid ticker where you can park your cash and expect predictable gains in the long run with nearly no drama disrupting its growth trajectory.