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Earnings Recap: Accenture's Stellar Q4 Results

By Brian Withers and Neil Patel - Oct 23, 2021 at 8:15AM

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For the full year, Accenture hit record revenue of $50.5 billion, an 11% year-over-year increase.

Accenture ( ACN 0.86% ) recently reported outstanding fourth-quarter results, despite a tremendously difficult year impacted by COVID-19. In this video clip from "Beat & Raise," recorded on Sept. 24, Fool.com contributors Brian Withers and Neil Patel unpack the latest earning report to show how the company knocked it out of the park. 

Brian Withers: Well, we're going to kick it off with Accenture first, ticker symbol, ACN and Neil, this one's yours, right?

Neil Patel: Thanks, Brian. Yeah, Accenture recorded their fiscal Q4 and full-year 2021 results earlier this week. Pretty positive quarter. The stock pop two percent right after the announcement. Just some high-level overview of the earnings. Q4 revenue of 13.4 billion was up 21 percent year-over-year, and that beat Wall Street estimates by 100 million. Q4 adjusted EPS of $2.20 was up 29 percent year-over-year. Pretty big beat. Again, that was not off a weak comparison in the prior-year period. I think revenues were flat or slightly up in the year-ago period, so still a nice increase there. Then for the full year, Accenture hit record revenues of 50.5 billion, and that's an 11 percent year-over-year increase. Fiscal full-year 2021 adjusted EPS of $8.80, which was up 18 percent year-over-year.

Turning to guidance now, for the current quarter revenue is expected to come in between 13.9 and 14.35 billion, which would be about 20 percent growth at the midpoint. For the full year, revenue growth is expected to be 12 percent to 15 percent. That came in ahead of Wall Street estimates, so that's why you saw the positive reaction in the stock price. Again, for the full year, EPS growth is expected to be 13 to 16 percent, free cash flow of 7.5 to eight billion dollars for the full year. Just to dig in a little bit, the operating margin for the full-year was up 40 basis points came in at 15.1 percent. Free cash flow in the fourth quarter was $2.2 billion and 8.4 billion for the full year, so this is a pretty perennial cash-generator, and how companies that sell physical goods have something called backlog. For Accenture, they report their bookings.

For the most recent quarter, Accenture booked $15 million of new bookings, which is basically future revenue contracts that they signed with clients for outsourcing, for consulting services, and so you want to see that number higher than your current revenue. That kind of forecast that there's growth on the horizon. That was positive. Then for the full year, Accenture booked 59.3 billion in bookings, which was another record for the company, that was up 20 percent from the prior year. Again, I talked about how the company generates a lot of cash, unsurprisingly, they increased their dividend by 10 percent this year and management authorized another $3 billion of share repurchases, bringing the total authorization up to $6.3 billion. That's after the company returned 5.9 billion in cash to shareholders in the prior, and this past year.

Then looking to the company's geographies, Accenture breaks out revenue from North America, from Europe, and then from growth markets which is Asia-Pacific, Lat Am and Middle East, and Africa. You saw close to 20 percent revenue growth across the board. As it stands today, North America represents just under half of total revenue. That's shrinking over time. Europe represents 32 percent of revenue and growth markets is 21 percent. One thing I want to point out is, Accenture is operating margin in their North American segment is pretty much significantly higher than its operating margin in Europe and the growth markets. As you see those other geographic segments sort of grow their revenue, you can see it won't be surprising to see the company's overall operating margins creep up over time, which is obviously a good sign.

Then also, there are really no concentration risks for Accenture. They primarily serve five different industry groups. Communications Media Tech, up 23 percent in the quarter. Financial Services up 20 percent in the quarter, Health and Public Services up 18 percent in the quarter. Products up 25 percent in the quarter, and resources up 13 percent. None of these groups account for more than 27 percent of Accenture's revenue, so pretty diversified geographically. As far as the industry groups are concerned.

Withers: You know, I haven't followed Accenture very much but this is a stellar result. I'm looking at it, they have a really nice infographic that really highlights the business. If you ask me to peg Accenture's revenue for the year, I never would've guessed that it was in the $51 billion number, an increase of 11 percent in local currency is just in a tremendously difficult year with companies pulling back on spend for coronavirus. These guys have knocked it out of the park.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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